| Company | Value | Change | %Change |
|---|
Recently, the Securities and Exchange Board of India (SEBI) debarred Ketan Parekh and others from participating in the stock market after uncovering a ₹65.77 crore front-running scam and issued an interim order-cum-Show Cause Notice (SCN) in this regard.
SEBI order
In its order, SEBI noted that Parekh and others used non-public information (NPI) to orchestrate illegal stock market trades. They orchestrated a novel method of front-running trades of a ‘Big Client’.
“While the traders of the Big Client were discussing trades with Rohit Salgaocar to ensure counterparties for their trading, Rohit Salgaocar was using that information to make illegal profits by routing information to Ketan Parekh. When the information reached Ketan Parekh, he acted systematically and trades were executed in different accounts which cumulatively generated unlawful profits,” read the order.
How SEBI tracked the operation
During the investigation, SEBI discovered at least 10 mobile numbers — registered in different names — located together at the Mumbai residence of Parekh, Business World reported.
These numbers were also found to be travelling with Parekh, who used them to obtain NPI on stock prices from a Singapore-based trader. Later, he communicated it to his network of front entities for the execution of trades.
On March 15, 2023, Parekh visited SEBI’s office and submitted his Aadhaar Card, containing the phone number “XXX0308243.” Later, it was found the same number was also linked to his wife’s Aadhaar Card. This number was later found to be part of the broader network used by Parekh and his associates.
Parekh, in a statement to SEBI on December 12, 2023, confirmed that “XXX0308243” belonged to his wife.
Thereafter, SEBI analysed the location data of the phone number and matched it with the other mobile numbers, which were used to communicate the NPI. “Thus, location data of Parekh’s phones, WhatsApp chat details of suspects and testimony of key accused in the matter gave away the full trail,” the report said.
Front Runner
Through these mobile numbers, Parekh and Salgaocar, based in Singapore, communicated with a network of front runners who used to execute trades based on insider information. Parekh used to provide them with stock tips, or NPI, after obtaining them from Salgaocar, reports said.
In the investigation, it was revealed that Salgaocar got access to confidential information regarding trades placed by a large US-based fund (referred to as ‘Big Client’).
In a statement to SEBI, Salgaocar said, “Dealer of the Big Client provides me with the name of the stock they are interested in. I will check the availability with different market participants including foreign funds, Indian funds, other holders of the shares etc. and lastly with Ketan Parekh.”
Further, he admitted that 90% of the Big Client’s trades were fulfilled by Parekh.
Birthday greeting For Ketan Parekh
As part of the investigation, SEBI analysed trading data, WhatsApp messages as well as call records which helped the agency to establish a link between Parekh and others.
A crucial piece of evidence was found from a WhatsApp chat of one of the suspects, Sanjay Taparia, accused of front-running for Parekh.
Taparia had on February 15, 2023, wished happy birthday to one “Jack Latest,” who was later revealed to be Parekh himself as his date of birth was the same as on his PAN card.
