Description

SEBI investigation order against 27 entities for employing deceptive trading strategies and artificially increasing price and volume in DU Digital scrip during August 2021 to March 2023.

Summary

SEBI has issued an order under Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of the SEBI Act, 1992 against 27 entities (26 individuals and 1 corporate entity - Sun Flower Broking Private Limited) for fraudulent and unfair trade practices in the scrip of DU Digital Technologies Limited (now DU Digital Global Limited). The investigation revealed that these connected entities acted as a group and employed deceptive trading strategies, artificially manipulating the price and volume of the scrip during the investigation period from August 26, 2021 to March 31, 2023.

Key Points

  • DU Digital listed on SME platform of NSE on August 26, 2021 at Rs.12/share
  • Share price increased by 1392.5% during the investigation period, closing at Rs.179.10 on March 31, 2023
  • Scrip reached highest price of Rs.296.05 on November 11, 2022 - representing 2467% increase from listing price
  • 27 entities found to be connected based on common mobile numbers, Mac-IDs, IP addresses and frequent fund flows
  • Entities acted as a coordinated group employing deceptive trading strategies
  • Investigation period divided into 4 patches based on trading patterns
  • Violations of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003

Regulatory Changes

This is an enforcement action order and does not introduce new regulatory changes. It applies existing PFUTP Regulations to penalize market manipulation.

Compliance Requirements

  • All 27 named entities are subject to SEBI’s enforcement action
  • Entities identified: 26 individual traders and 1 corporate broker (Sun Flower Broking Private Limited)
  • Action taken under multiple sections of SEBI Act, 1992 for market manipulation
  • Market participants should note that coordinated trading through connected entities using common infrastructure will be detected and penalized

Important Dates

  • August 26, 2021: DU Digital listing date on NSE SME platform at Rs.12/share
  • November 11, 2022: Scrip reached peak price of Rs.296.05
  • August 26, 2021 to March 31, 2023: Investigation Period
  • January 1, 2026: Order issue date (Order No. QJA/MN/IVD/ID7/31947/2025-26)

Impact Assessment

Market Impact: This enforcement action demonstrates SEBI’s capability to detect and act against coordinated market manipulation on SME platforms. The case involved extreme price manipulation with the scrip price increasing nearly 25 times from listing price through artificial means.

Investor Protection: The order serves as a strong deterrent against fraudulent trading practices and protects retail investors from artificially inflated prices created by manipulative groups.

Surveillance Enhancement: The investigation showcases SEBI’s surveillance mechanisms that can identify connected entities through multiple parameters including common infrastructure (mobile numbers, IP addresses, Mac-IDs) and fund flow analysis.

SME Platform Scrutiny: Highlights increased regulatory scrutiny on SME platform listings where lower liquidity can make scrips more susceptible to manipulation by coordinated groups.

Impact Justification

Major enforcement action against 27 entities for market manipulation involving price increase of 2467% from listing price, demonstrating coordinated fraudulent trading practices