Sebi banned Mehul Choksi from the capital markets for ten years and fined 5 billion rupees for trading manipulation.
- They left the country after the discovery of the scheme.
- On May 20, 2022, SEBI issued a warning.
- Why did Choksi mislead the market for these stocks?
Mehul Choksi, a wanted businessman, was banned from the stock exchanges for ten years and fined Rs. 5 crores by Sebi for engaging in dishonest trading in shares of Gitanjali Gems Ltd. In accordance with SEBI directive, he has 45 days to pay the sentence.
Mehul Choksi, who is Nirav Modi’s maternal uncle, served as Chairman and Managing Director of Gitanjali Gems and was part of the company’s promoter group. Through his mother, Choksi is also related to Nirav Modi. They are both accused of stealing over Rs 14,000 crore from the government-owned Punjab National Bank (PNB).
Indian judicial authorities are looking for Mehul Chinubhai Choksi, an Indian-born businessman who resides in Antigua and Barbuda, for criminal association, criminal breach of trust, fraud including delivery of goods, bribery and money laundering. silver. Choksi claimed in an interview that he is innocent and that all charges against him are false, unjustified and made for political reasons.
Since 2017, Choksi has been a citizen of Antigua. He owns the Gitanjali Group, an Indian jewelry retailer with 4,000 locations. An arrest warrant for Choksi has been issued in connection with the alleged fraud case involving the National Bank of Punjab. In 2013, he was allegedly complicit in stock market manipulation. He disappeared from Antigua and Barbuda at the end of May 2021. He was apprehended in Dominica while trying to evade capture in Cuba by boat. His return from the Commonwealth of Dominica has been suspended by a Caribbean court.
After the discovery of the scam, left the country.
In early 2018, Mehul Choksi and Nirav Modi learned of the fraud and both immediately left the country. Nirav Modi is incarcerated in a British prison, while Choksi is in Antigua and Barbuda. Nirav Modi’s extradition request to India has been challenged.
SEBI issued a warning in May 2022.
The pending legal actions against Choksi are the result of a joint show cause notice that regulator Sebi issued against him in May 2022 as part of a review into alleged manipulation of trading in Gitanjali Gems shares. . The regulator conducted a review to look at stock trades made by a few companies between July 2011 and January 2012.
SEBI discovered the claim during its investigation.
According to Sebi’s order, Choksi supported a group of 15 “front companies” which were directly or indirectly related to him and each other and which purchased shares of Gitanjali Gems during the investigation period in the cash and cash categories. derivatives. They had served as shell companies for his manipulation of the company’s shares.
It was discovered that the company had transferred a total of 77.44 billion rupees in cash to shell entities. Of these Rs 77.44 billion, funds amounting to Rs 13.34 billion were used by front entities for the purpose of trading certificates.
Why did Choksi mislead the market for these stocks?
The regulator noted that immediately prior to the investigation period, the percentage of Gitanjali Gems shares that were available to general investors was 28.96% for the quarter ending June 2011. This percentage did not include the holdings of the company’s promoters or the banks. , financial institutions or REITs. In the September 2011 quarter, this figure fell to 19.71%. After the investigation period, the percentage of shares available to regular investors increased to 25.36%.
This shows that Choksi attempted to corner market share during the investigation period through shell entities, which resulted in an increase in the shares available to regular investors when the shell entities sold the shares. on the market. Moreover, by accumulating disproportionate positions in the derivatives space, shell entities have cornered the position limitations in the Gitanjali Gems certificate.
“I believe that the conclusions described above, together with the failure of Mehul C. Choksi (the notice) to refute them, indicate the role of the notice in creating a false and misleading appearance of commerce in the GGL certificate by using and supporting shell companies to perform manipulated transactions.
In her 20-page decision, Ashwani Bhatia, a full-time member of Sebi, said: “I now find that the review breached the Prohibition of Fraudulent and Unfair Trading Practices Regulations (PFUTP). As a result, Choksi is no longer permitted to “buy, sell or trade in shares, directly or indirectly, in any way”, according to the regulator. In addition, Choksi is banned from participating in the securities market for a period of ten years and must pay a fine of $5 billion.
Choksi was fined Rs 1.5 crore and banned from the stock exchanges for a year by Sebi in February this year for breaching insider trading laws regarding Gitanjali Gems. The ban came after Choksi was found guilty of breaking those rules in February. The regulator fined Choksi, Gitanjali Gems and one other person a total of Rs 5 crore in February 2020 for breaching several rules, including listing standards, in connection with the major PNB fraud.
edited and proofread by nikita sharma