MUMBAI: The infamous stock market player Ketan Parekh, more known since the stock market scam of 2000, has once again landed in the regulatory net with the Securities and Exchange Board. Sebi debarred him, Singapore-based trader Rohit Salgaocar, and 20 others/entities from the markets for alleged front-running for a US-based large foreign portfolio investor.
The Sebi probe has found that, using as many as 10 fake phone numbers, KP and his associates made around Rs 66 crore of illicit gains, which the regulator wants to be disgorged from the scamsters.
In a 188-page interim order issued late last night against 22 other individuals/entities, the regulator has directed the disgorgement of Rs 65.77 crore of illegal gains made through the alleged scheme. Sebi has also frozen the bank accounts of these 22 entities for any debit. The US front is said to be managing around $2.5 trillion worth of funds globally.
Others who are banned include GRD Securities, Salasar Stock Broking, Anirudh Damani, Ashok Kumar Damani and entities involving Basukinath Properties, APR Properties for acting in connivance with Parekh.
“While the traders of the big client (FPI) were discussing trades with Salgaocar to ensure counter-parties for their trading, Salgaocar was using that information to make illegal profits by routing information to KP. When the information reached KP, he acted systematically, and trades were executed in different accounts, which cumulatively generated unlawful profits to the tune of Rs 66.77 crore,” whole-time member Kamlesh Varshney said in the Sebi order.
The order highlights the need for interim action, noting KP’s involvement in the previous scam and his status as a habitual offender.
The 22 entities mentioned in the order include front-runners, stock brokers, facilitators, and directors of several other firms. KP used to instruct the front-runners using different mobile phones registered under different names and was known as ‘Jack’, ‘John’, ‘Boss’, and ‘Bhai’ among other names, according to the findings.
Sebi found at least 10 mobile numbers registered on different names, all together at the Mumbai residence of KP. The same mobile numbers also went wherever KP travelled; he had used these mobile numbers to obtain non-public information (NPI) on stock prices from a Singapore-based trader Salgaocar and then further communicated it to his network of front entities for execution of trades on his behalf.
First, Sebi obtained the subscriber details of these phone numbers mentioned by KP to Sebi on his last visit in May and July 2024. It was found that one of the numbers belonged to Parekh's wife Mamta with address at Zaver Mahal, 19/b, Marine Drive, Mumbai.
Sebi has also found that the phone numbers that KP used were located together at different hotels in various locations at a time. By tracking the numbers, Sebi observed that KP visited Hotel Rambagh Palace, Jaipur after taking a flight from Mumbai on November 27, 2022 and then moved through Jaipur, Agra, Morena and Gwalior by road. He took a flight from Gwalior to Mumbai on December 01, 2022.
Sebi’s findings indicate that KP and Salgaocar were running the alleged scheme for almost 2.5 years and were caught following a new alert model for identifying information-based trades.
The market regulator has alleged that KP, who was earlier debarred from the markets for 14 years for his role in the infamous 2000 stock market scam, has orchestrated a new method for front-running trades by staying out of the regulatory ambit. KP was convicted of price manipulation and circular trading in the 2000 scam.
While Salgaocar provided the information on forthcoming trades of the US fund, which he had access to, KP built the positions through his various associates in Kolkata. Salgaocar had a referral agreement with Motilal Oswal Financial Services and Nuvama Wealth Management to refer the trades of this fund to them. Sebi carried out a search and seizure operation in June 2023 at 17 premises in a joint investigation with other authorities.
To confirm KP’s identity, Sebi analysed chats, messages, mobile phone locations, IMEI numbers, hotel bookings, and even birthday messages.
The money changed hands between the entities involved using Angadiyas, who are the age-old traditional network of people who ferry cash, jewellery and documents for a meager fee. Angadias operate on trust outside of the banking system.
Sebi has also forwarded a copy of the order to Nuvama and Motilal to enable them to take appropriate actions for strengthening their internal controls to prevent such violations.