Description

SEBI order under Section 11 of SEBI Act, 1992 against 27 entities for employing deceptive trading strategies and contributing to artificial price and volume increase in DU Digital scrip during August 26, 2021 to March 31, 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, including 26 individuals and 1 company - Sun Flower Broking Private Limited) for engaging in fraudulent and unfair trade practices in the scrip of DU Digital Technologies Limited (now DU Digital Global Limited). The investigation covered the period from August 26, 2021 to March 31, 2023, during which the scrip price increased by 1392.5% from the listing price of Rs.12/share to Rs.179.10, with a peak of Rs.296.05 (2467% increase) on November 11, 2022.

Key Points

  • DU Digital Technologies Limited listed on NSE SME platform on August 26, 2021 at Rs.12/share
  • Stock price rose 1392.5% to Rs.179.10 during the investigation period (August 26, 2021 to March 31, 2023)
  • Peak price reached Rs.296.05 on November 11, 2022 (2467% increase from listing price)
  • 27 entities identified as acting in concert through connected trading activities
  • Connected entities (Noticee No. 1-26) identified based on common mobile numbers, Mac-IDs, IP addresses and fund flows
  • Entities employed deceptive trading strategies contributing to artificial price and volume increase
  • Investigation period divided into 4 patches based on trading patterns
  • Order issued under SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003

Entities Named

Individual Noticees (1-26): Usha Devi, Jagdish Chhanabhai Vaghela, Mahendrabhai Sanghvi, Kuntal Jitendra Trivedi, Jigneshkumar Purshottamdas Patel, Girish Kantilal Parmar, Pranav Kamleshkumar Trivedi, Nikunj Sureshchandra Shah, Sagarkumar Pravinchandra Dataniya, Vidhi Nikunj Shah, Nayan Mahendrabhai Thakkar, Babubhai Somabhai Rathod, Manjulaben Parmar, Ankit Ajitbhai Panchal, Bhaumik Parmar, Manoj Rameshbhai Solanki, Rathod Mahendrkumar, Shvetalben Sagarbhai Dataniya, Rohit Bairwa, Madhu Kumari Bairwa, Sanjay Savjibhai Parmar, Dhaval Vinodbhai Gadani, Dhaval Girishbhai Parmar, Punjiben Babubhai Rathod, Vyas Jitendrakumar Hasmukhlal (HUF), Jitendra Hasmukhlal Vyas

Corporate Noticee (27): Sun Flower Broking Private Limited (PAN: AAACN5165E)

Regulatory Violations

  • Violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003
  • Coordinated trading activities among connected entities forming a group
  • Deceptive trading strategies employed to manipulate price and volume
  • Artificial increase in price and trading volume in DU Digital scrip

Investigation Findings

  • Connected entities identified through:
    • Common mobile numbers
    • Common Mac-IDs
    • Common IP addresses
    • Frequent fund flows among noticees
  • Trading pattern analysis divided investigation period into 4 distinct patches
  • Group acted in concert to manipulate market prices

Compliance Requirements

Market participants must:

  • Avoid coordinated trading activities aimed at price/volume manipulation
  • Ensure compliance with PFUTP Regulations
  • Maintain independence in trading decisions
  • Refrain from creating artificial market conditions

Important Dates

  • August 26, 2021: Listing date of DU Digital at Rs.12/share
  • November 11, 2022: Peak price of Rs.296.05 reached
  • August 26, 2021 to March 31, 2023: Investigation Period
  • 2026-01-01: Order publication date

Impact Assessment

Market Impact: This enforcement action demonstrates SEBI’s active surveillance of SME platform stocks and its commitment to detecting and penalizing coordinated manipulation schemes. The 2467% price increase at peak highlights the severity of manipulation possible through connected entity trading.

Investor Impact: Retail investors who traded during the manipulation period may have suffered losses when purchasing at artificially inflated prices. The order serves as a warning about risks in thinly traded SME stocks susceptible to manipulation.

Regulatory Impact: Reinforces SEBI’s use of advanced analytics to detect connected entities through digital footprints (IP addresses, Mac-IDs, fund flows). Sets precedent for enforcement against coordinated groups engaging in deceptive trading practices on SME platforms.

Impact Justification

SEBI enforcement order against 27 entities for coordinated market manipulation resulting in 1392.5% price rise (up to 2467% at peak) through deceptive trading practices, violating PFUTP Regulations