Sebi Monday banned fugitive businessman Mehul Choksi from the securities markets for 10 years and fined him Rs 5 crore for indulging in fraudulent trading in the shares of Gitanjali Gems Ltd. He has been ordered to pay the fine within 45 days, according to the order of the Securities and Exchange Board of India (Sebi).
Choksi, who was the chairman and director and was also part of the Gitanjali Gems promoter group, is Nirav Modi’s maternal uncle. Both are accused of defrauding the state-owned Punjab National Bank (PNB) over Rs 14,000 crore.
Both Choksi and Modi fled India after the PNB scam came to light in early 2018. While Choksi is said to be in Antigua and Barbuda, Modi is in a British prison and has challenged India’s extradition request.
The present proceeding stems from a joint show cause notice issued by Sebi in May 2022 against Choksi following an investigation by the regulator into the alleged manipulative trade in Gitanjali Gems scrip. The regulator conducted an investigation into the trading activities of certain entities in the company’s script for the period July 2011 to January 2012.
In the injunction, Sebi said Choksi had funded a series of 15 entities known as “front entities,” which were directly or indirectly linked to him and to each other, and which had held positions in both cash and cash. Gitanjali Gems script. derivatives segments during the investigation period. He had used them as front entities for manipulation in the company’s thesis.
It was noted that the funds transfers by the company to front entities amounted to Rs 77.44 crore, of which funds amounting to Rs 13.34 crore were used by front entities to trade in the scrip.
The regulator noted that shares of Gitanjali Gems, excluding promoter holding and bank/financial institutions/FPIs holdings available to general investors, stood at 28.96 percent for the quarter ended June 2011. This was reduced to 19.71 percent. in the quarter ended September 2011. Subsequently, the shares available to general investors rose to 25.36 percent after the investigation period.
This indicates that Choksi, through front entities, tried to corner the shares available in the market during the IP to reduce the shares available to general investors, which then rose after the front entities put the shares on the market. sold. Furthermore, the front entities have cornered the position limits in Gitanjali Gems script by building a significantly large position in the derivatives segment.
“I find that the above findings, coupled with the fact that the declarant (Mehul Choksi) has not refuted the said findings, clearly demonstrates the declarant’s role in creating a false and misleading appearance of dealing in GGL’s script by using and financing the front entities in carrying out manipulated transactions.
“So I find that the accused has violated the provisions of … PFUTP (Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations),” said Sebi Whole Time member Ashwani Bhatia in his 20-page order.
Accordingly, the regulatory body has prohibited Choksi “from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner whatsoever and is further prohibited from accessing the securities market, for a period of ten years … and the notice will pay a fine of Rs 5 crore.”
In February of this year, Sebi Choksi had been banned from the securities markets for a year and fined him Rs 1.5 crore for violating insider trading rules in the issue of Gitanjali Gems.
In February 2020, the regulator imposed a total fine of Rs 5 crore on Choksi, Gitanjali Gems and another person for violating various regulations, including listing standards, in connection with the massive fraud on PNB.
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