Description

SEBI order under Section 11 of SEBI Act against 27 entities for fraudulent and unfair trade practices involving coordinated trading activities that artificially inflated the price of DU Digital scrip by 2467% during August 2021 to March 2023.

Summary

SEBI has issued an order under Section 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act, 1992 against 27 entities (Noticee No. 1-27) for engaging in fraudulent and unfair trade practices in the scrip of DU Digital Technologies Limited (now DU Digital Global Limited). The investigation revealed that 26 connected entities (Noticee No. 1-26) acted as a coordinated group employing deceptive trading strategies that artificially inflated the stock price by 2467% from its listing price during the investigation period of August 26, 2021 to March 31, 2023. The scrip was listed on NSE’s SME platform at Rs. 12/share on August 26, 2021, and reached a peak of Rs. 296.05 on November 11, 2022, before closing at Rs. 179.10 on March 31, 2023 (a 1392.5% increase from listing price).

Key Points

  • 27 entities identified as violating SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003
  • DU Digital Technologies Limited listed on NSE SME platform on August 26, 2021 at Rs. 12/share
  • Stock price increased by 2467% to reach highest price of Rs. 296.05 on November 11, 2022
  • Investigation Period: August 26, 2021 to March 31, 2023 (closing price Rs. 179.10, up 1392.5%)
  • Noticee No. 1-26 identified as connected entities acting as a coordinated group
  • Connections established through common mobile numbers, MAC IDs, IP addresses, and frequent fund flows
  • Investigation period divided into 4 patches based on trading patterns
  • Entities employed deceptive trading strategies contributing to artificial price and volume increases
  • Order reference: QJA/MN/IVD/ID7/31947/2025-26
  • Noticee No. 27 identified as Sun Flower Broking Private Limited (broker entity)

Regulatory Changes

No new regulatory changes introduced. This order enforces existing provisions under:

  • SEBI Act, 1992: Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2)
  • SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003
  • SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995, Rule 5

Compliance Requirements

The 27 noticees are subject to penalties and restrictions as determined under the SEBI enforcement order. Market participants should:

  • Avoid coordinated trading activities that artificially manipulate stock prices and volumes
  • Ensure trading activities comply with PFUTP regulations
  • Maintain independent trading decisions without group coordination
  • Be aware that connections through shared devices, IPs, mobile numbers, and fund flows can establish coordinated group activity
  • Brokers must ensure proper due diligence and monitoring of client trading activities

Important Dates

  • August 26, 2021: DU Digital listed on NSE SME platform at Rs. 12/share
  • August 26, 2021 to March 31, 2023: Investigation Period
  • November 11, 2022: Stock reached peak price of Rs. 296.05 (2467% increase from listing)
  • March 31, 2023: End of investigation period, closing price Rs. 179.10
  • 2026-01-01: Order issued by SEBI

Impact Assessment

Market Impact: This enforcement action demonstrates SEBI’s continued focus on detecting and penalizing coordinated manipulation schemes, particularly in SME segment stocks which are more susceptible to price manipulation due to lower liquidity. The 2467% price increase achieved through coordinated group activities severely distorted price discovery and harmed genuine investors.

Investor Impact: Retail investors who purchased DU Digital shares during the artificially inflated price periods likely suffered significant losses when the manipulation ceased. The order serves as a warning about elevated risks in SME platform stocks.

Regulatory Impact: Reinforces SEBI’s capability to identify connected entities through technological footprints (common IPs, MAC IDs, mobile numbers) and financial trails (fund flows). Establishes precedent for group liability in coordinated manipulation cases.

Broker Impact: Inclusion of Sun Flower Broking Private Limited as Noticee No. 27 highlights broker accountability for facilitating suspicious trading activities and underscores the need for enhanced surveillance and client due diligence.

SME Platform Impact: Raises concerns about manipulation vulnerabilities in SME segment and may lead to enhanced surveillance measures for newly listed SME stocks experiencing abnormal price movements.

Impact Justification

Major enforcement action against 27 entities for coordinated market manipulation involving extreme price inflation (2467%) through fraudulent trading practices in violation of PFUTP regulations