Sebi cracks down on ‘pump & dump’ YouTube schemes

The regulator in two separate orders barred 55 entities including actors Arshad Warsi and his wife Maria Goretti from the securities market for alleged price manipulation through YouTube and subsequently offloading the inflated shares of Sadhna Broadcast and Sharpline Broadcast.

Sebi said a nexus of 31 players made unlawful gains of ₹41.85 crore in Sadhna Broadcast case, while 24 players have allegedly gained ₹12.14 crore in Sharpline Broadcast, which it has directed to be impounded.

Arshad Warsi and his wife made a profit of ₹29.43 lakh and ₹37.56 lakh, respectively. Sebi has termed the roles of them in the scheme as ‘volume creator’ and ‘profit maker’.

The regulator said it received certain complaints alleging that misleading YouTube videos with false content, backed by a large marketing campaign for additional reach, were being uploaded to lure investors. Once these unsuspecting investors entered the stock, the said entities allegedly offloaded their holding at an inflated price.

These entities would upload false and misleading news about the said companies on the video streaming platform. These channels were – Moneywise, The Advisor, MidCap Calls and Profit Yatra.

Sebi said these YouTube channels had lakhs of subscribers and the YouTube videos had crores of viewership aided by promotion through paid advertising campaigns. Subsequently, the misleading YouTube videos ceased to be available for public viewing, Sebi said.The regulator alleged that two YouTube channels The Advisor and Moneywise uploaded videos on Sadhna in July 2022. In the case of Sharpline, Midcapcalls and ProfitYatra had uploaded videos in May 2022.

These YouTube videos “peddled false and misleading news”, recommending investors should buy these stocks for extraordinary profits, said the regulator

Subsequent to the release of the YouTube videos, there was an increase in the price and trading volume of the Sadhna shares, according to Sebi.

The volumes appear to have been contributed by large number of retail investors likely influenced by the misleading YouTube videos, it said.

Amid the pick-up in trading volumes, certain promoter shareholders, key management personnel of Sadhna, and non-promoter shareholders who held more than 1% of shareholding in Sadhna offloaded a significant part of their holdings at inflated prices and booked profits, the regulator said.

The regulator also observed that the videos contained false and deceptive statements about the growth story and future prospects of the company. The videos recommended investors to buy the scrip to earn substantial profits.

Disabling the comments section on the YouTube Channels, prima facie appears to be an attempt to avoid any negative counter view to the messages disseminated through the YouTube videos, Sebi said.

“…the elaborate modus operandi adopted by the Noticees, including the egregious misuse of patently false and misleading YouTube videos, had led to drastic increase in the number of small shareholders (i.e., from 2,167 to 55,343 shareholders) who ended up buying shares from the Noticee Net Sellers and Volume creators at inflated prices,” the regulator said in its order.