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The Securities and Exchange Board of India (SEBI) has barred two operators -- Shivprasad Pattiya and Alkesh Narware -- for three years, alleging that they fraudulently created artificial volume in illiquid stocks options and cheated investors, and directed them to return Rs 4.83 crore (with 12 per cent from February 1, 2022) within 45 days.

The capital markets regulator also imposed a penalty of Rs 25 lakh each on both operators under “Section 15HA of the SEBI Act, 1992”.

The duo is “restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities (including units of mutual funds), directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of Three (3) Years, from the date of this order,” read the SEBI order.

They have also been prohibited from selling their assets, properties including mutual funds, shares, securities held by them in demat and physical form except for the purpose of effecting disgorgement.

SEBI had received an alert in ‘Out of the Money’ (“OTM”) stock option contracts with high low-price variations without corresponding movement in underlying scrip that certain group of entities had executed trades at prices away from fair prices and consistently made a positive square off difference.

Further, NSE received various complaints from investors stating that they had shared their credentials with some WhatsApp group members for Algo/software trading with assurance of good profit and that subsequently, the trades were executed in their trading accounts which resulted in loss amounting to lakhs.

Based on the aforesaid alerts and complaints, SEBI conducted an investigation in the matter to look into the role of a group of entities led by Pattiya and Narware in the alleged misuse of online trading kits of investors, promising guaranteed returns from algo/software-based trading and execution of fraudulent and manipulative trades in illiquid ‘Out of the Money’ (OTM) stock options, primarily aimed at transferring funds from unsuspecting investors/complainants to front entities, controlled or managed by them.

SEBI alleged that a plan was devised under which operators employed callers to lure investors to invest in market and promised guaranteed return.

Investors received persistent calls and messages from these callers. The callers approached investors on the pretext of guaranteed profit through Algo trades or automated software trades.

The operators, after taking the investors into confidence, obtained their log in credentials and then placed stock options bets in such a manner that investors ended up losing the premium.