Sebi bans two from markets for 3 yrs; impounds illegal gains of ₹4.83 cr

Markets regulator Sebi has barred two individuals from the securities markets for three years and impounded illegal gains of over Rs 4.83 crore made by them for orchestrating a fraudulent scheme using out of the money (OTM) stock options to misappropriate funds from investors.

Apart from the securities market ban, the regulator also slapped a penalty of Rs 25 lakh each on Shivprasad Pattiya and Alkesh Narware and directed them them to pay the fine within 45 days, Sebi said in the order passed on Friday.

Further, Sebi directed Pattiya and Narware to disgorge unlawful gains worth Rs 4.83 crore with an interest of 12 per cent per annum jointly and severally from February 2022.

In the final order, Sebi found that the front entities had opened the trading accounts under the instructions of the operator group (Shivprasad Pattiya and Alkesh Narware) and these trading accounts and bank accounts were under the control of the operator group.

Sebi observed that the caller group had identified prospective investors (complainants) which had credit balance in their ledger and obtained their credentials in the name of Algo/software trades and the same were also under the control of the Shivprasad Pattiya and Alkesh Narware.

The trades executed through the mobile in the accounts of the complainants and the front entities were also under the control of the Pattiya and Narware, Sebi said.

"...it is established that the entire fraudulent scheme is attributable solely and squarely to the noticees (operator group) and they were the controlling minds and beneficiaries of the fraudulent arrangement.

"The acts of the noticee amounts to manipulative, deceptive device and artifice to defraud while dealing in securities," Sebi's Quasi Judicial Authority N Murugan said in the order.

Pattiya and Narware were found to have violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.

The order came after the Securities and Exchange Board of India (Sebi) received alerts on suspicious trades in illiquid 'Out of the Money' stock options with unusual price variations. NSE also got complaints from investors who suffered losses after sharing trading credentials for Algo-based trading via WhatsApp groups.

Thereafter, Sebi conducted a probe to look into the role of a group of entities led Shivprasad Pattiya and Alkesh Narware allegedly misused online trading kits, promised guaranteed returns, and executed manipulative trades. The investigation covered the period from January 2021 to February 2022.