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Stocks

SEBI Gets First Financial for Stock Manipulation, With 152 People Using it to Convert Black Money

Do you like this stock?

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If the word “manipulation” comes to mind, then you’re probably bang on target. SEBI found that this stock was manipulated by upto 152 entities!

In an interim order, they’ve dinged all the persons involved. The stock was manipulated, SEBI says, in a complex roundabout manner:

    • The stock went from Rs. 5 to Rs. 263 in 115 trading days from 2012 to 2013.
    • After a sideways move of up 10% and then down 40%, the stock was split 1:10 
    • After which it fell more than 50%
    • The upmove was built by circular trading among a few entities (very low volume)
    • There was massive preferential allotment to many entities
    • Economic times says that a profit of Rs. 485 cr. was generated for them as capital gains.

The company had no real operations, and no useful financials, so it was just a conduit for generating these gains – and the whole game smells like a black money conversion scheme.

This kind of thing has been happening big time in many places, and only Moneylife has been exposing many such schemes. They have an entire section on such manipulation!

The point is: All our black money isn’t black because it is being used by such entities to convert to “white”, tax-free money since long term capital gains are not taxed. The most important thing is now:

  • The Income tax department should immediately file suits against all such entities for explanations
  • The brokers and share manipulators should be put in jail for criminal fraud
  • The people involved should forfeit all capital gains and pay 100% penalties, plus potential jail time if more such offenses are found. (they’re probably not new at this game)

If authorities do this, we might see such activities stop. Otherwise this will continue, in the Bombay lingo, “bindaas”. (Without fear of retribution)

Such scumbags will not be fought by the political torch bearers of anti corruption either, whose only targets are big industrialists. But the dirtiest of the lot are such wheeler dealers, and unless they are brought to justice, we’ll never see the end of corruption and stock manipulation.

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  • piyush says:

    all our black money is right here.. go to MCA website.. check out the financials of so many small companies have turnover between 20-100 crores… most of them will have net profit margins of 0.05-1%. Who in the right mind runs a business for profit margins of less than 1% ?
    there is no doub about it… all these are cases of profit manipulation to reduce tax outgo. Anybody who knows a little bit of the practical world will know instantly on seeing these numbers its where all the black money is generated. the tax dept also knows about it.. which is why at the lower levels all these guys will extort money from these companies.. even after paying 5-10 lakhs, they’ve still saved crores in taxes.. Govt should simply implement a minimum tax @ rate of 1% of turnover on these companies irrespective of their book profits.
    I’m going to make a compilation of such names and share it online one of these days

  • Ravi says:

    I have recently come across one more such company Luminaire Technologies.