SEBI bars Safefbulls operators from trading, asks them to pay back profit made in 'manipulative' trading

Safebulls, a Telegram channel that provided stock recommendations, was barred by the Securities and Exchange Board of India from accessing the stock markets for one year after it said that the channel was engaged in manipulative trading.  Safebulls has over 60,000 subscribers on Telegram. 

In a notification, Sebi barred Hanif Kasambhai Shekh and Robert Resources Ltd, a commodity trading firm where Shekh is the managing director, from trading. RRL was incorporated on November 4, 1982, and listed at Metropolitan Stock Exchange (MSEI).

Sebi, which investigated Safebulls' operations, noted that the Telegram channel offered stock suggestions for both cash and derivative segments to its followers. As per the regulator, Robert Resources Ltd engaged in trading the recommended stocks on the Safebulls channel prior to their official recommendation. Following this, the positions were closed out.

SEBI  conducted an investigation for  the period January  01,  2021,  to  March  09, 2022,  to  ascertain whether Safebulls  was engaged in activities in contravention of the provisions of the Securities and Exchange Board of India Act, 1992  and the  SEBI  (Prohibition of  Fraudulent and  Unfair  Trade  Practices  Order in the matter of Telegram Channel Safebulls Relating to Securities Market) Regulations, 2003.

Sebi said: "It was observed that Noticee 2 used  to  take  positions in  the  scrips  which  were  recommended  on  the Telegram channel Safebulls prior to the said scrips being recommended on the Telegram channel. Subsequently, the said positions used to be squared off post recommendations were given on the Telegram channel, resulting in profits. Further,  the  SCN  alleged  that  recommendations  in  theTelegram channel had influenced the decision of investors dealing in such securities. Such recommendations on the channel had impacted the price and volume of the scrips which interfered with the free and fair operation of the markets."

According to SEBI, they initiated their strategy by acquiring shares of particular stocks in the RRL trading account. In order to entice and convince investors to buy these stocks, they would provide 'Buy' suggestions for these stocks on the channel. Ultimately, they would capitalise on the subsequent price increase following the recommendation and sell their shares for a profit. The wrongful gains made by Noticees were to the tune of about Rs 29 lakh. 

The  SCN  dated  January  04,  2024, was  sent  to  the  Noticees at the  address available on record. Pursuant to the issuance of SCN, replies were received from the  Noticees vide emails  dated February  06,  2024,  February  23,  2024  and March  13,  2024. The  Noticees also  sought additional  documents,  which  were provided to theNoticees on February 26, 2024.

In reply, noticees said the  trading  activities  in  question were conducted  transparently,  ethically  and  with  the  intention  of  benefitting investors. There was no violation of any SEBI Regulation.

The   Noticees   have referred   to   the complaint   based   on   which   the investigation against Safebulls was initiated by SEBI and have stated that the complainant lost money in 7NR Retail Ltd. and Maurya Udhyog Ltd. by following a separate Telegram channel. The Noticees have stated that these stocks were never recommended on the 'Safebulls' Telegram channel.

Sebi said the recommendations on the channel induced a large number of investors to deal in such stocks, causing fluctuations in the price and volume of the recommended stock. The capital market regulator has directed both Shekh and RRL to jointly disgorge the profit they made out of this entire manipulative trading fiasco. 

The Sebi order said the same must be disgorged within 45 days at an interest rate of 12% per annum from February 18, 2022, the date on which the last fraudulent trade was recorded. Sebi has also imposed an additional joint penalty of Rs 5 lakh on RRL and Shekh.

Last year, Sebi barred Mohammad Nasiruddin Ansari from the securities market and ordered him to pay Rs 17.2 crore gained unlawfully from carrying out investment advisory activities which were both unregistered and fraudulent.

Ansari ran a profile on social media platform X by the name of ‘Baap of Chart’, where he used to offer buy/sell recommendations in the stock market in the garb of providing educational training related to the securities market.

In March this year, Sebi barred two individuals from the securities market for three years and imposed a penalty of over Rs 77 lakh on them for their involvement in front-running. Front-running refers to an illegal practice in the stock market where an entity trades based on advanced information from a broker or analyst before the information has been made available to its clients.

The barred individuals were Rohit Mankotia and his mother Shila Devi.