WhatsApp chats to call records: How Sebi pieced together the Axis Mutual Fund front-running case

The Securities and Exchange Board of India (Sebi) has detailed how a combination of digital evidence, trading analysis and witness statements helped it unravel one of the country's biggest mutual fund front-running cases, culminating in a seven-year market ban on former Axis Mutual Fund chief dealer Viresh Joshi and Dubai-based trader Prijesh Kurani.

In its 146-page final order issued on July 24, Sebi concluded that Joshi misused confidential information relating to Axis Mutual Fund's impending trades between September 1, 2021 and March 31, 2022. The regulator also directed that the ₹30.56 crore already impounded in the case be treated as disgorgement and transferred to the Investor Protection and Education Fund, along with 12% annual interest from the end of the investigation period until deposit.

Alert system triggered the investigation

According to Sebi, the investigation began after its market surveillance system generated alerts indicating possible front-running in Axis Mutual Fund's trades. The regulator then examined trading records, communication data and financial transactions to reconstruct the alleged scheme.

The investigation found that Joshi, then Chief Dealer at Axis MF, allegedly had access to non-public information about large institutional orders before they were executed. Sebi said this information was passed to Kurani, who allegedly executed trades ahead of the fund house using multiple trading accounts.

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Digital trail became key evidence

Sebi's findings relied on a broad set of evidence rather than a single "smoking gun." The regulator examined call detail records (CDRs), WhatsApp conversations, trading terminal logs, witness statements and order execution data to establish links between the accused.

The order also refers to communication through Apple FaceTime and BOTIM, applications allegedly used to share non-public information between Joshi and Kurani. Investigators further relied on WhatsApp conversations containing coded references such as "Jadugar," which Sebi concluded referred to Joshi after analysing chats alongside travel records, mobile phone data and other circumstantial evidence.

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A network of trading accounts

According to the regulator, Kurani operated from Dubai using trading terminals provided by Marfatia Stock Broking and Woodstock Broking. Rather than trading in his own name, he allegedly placed orders through a network of accounts belonging to relatives, associates and connected entities.

Sebi said Sumit Desai, Pranav Vora and Vaibhav Pandya helped arrange "mule" accounts and trading infrastructure, while accounts belonging to Dharini Kurani, Rekha Kurani, Bharti Godaya, M K B Bespoke Audio General, Nishil Marfatia, Olga Trading, Bhavin Shah, Rupal Shah and Visa Capital Partners were allegedly used to execute the trades.

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Pattern of front-running

The regulator found that the trades consistently followed two patterns. In the Buy-Buy-Sell (BBS) pattern, shares were purchased just before Axis Mutual Fund's large buy orders and sold after the institutional trades pushed prices higher. In the Sell-Sell-Buy (SSB) pattern, positions were first sold ahead of the fund's sell orders and bought back after prices declined.

According to Sebi, this repeated pattern enabled the entities to profit from anticipated price movements created by the mutual fund's transactions. The regulator estimated total unlawful gains at ₹30.56 crore, with Visa Capital Partners accounting for the largest share at ₹14.07 crore.

Holding that the evidence collectively established the front-running scheme, Sebi imposed market bans ranging from three to seven years on 21 noticees and monetary penalties ranging from ₹10 lakh to ₹3 crore. The period already spent under the interim restraint order since February 2023 will be adjusted against their debarment.

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