Arshad Warsi Sebi Case: On May 29, the market watchdog, the Securities Exchange Board of India (Sebi), released a final enforcement order related to the matter of Sadhna Broadcast Ltd. In its investigation, the market regulator alleged the use of WhatsApp messages and other collusive trading methods to coordinate a ‘pump and dump’ scheme in shares of Sadhna Broadcast Ltd (Crystal Business Systems Ltd). The market watchdog found that 64 people were found to be involved in the scheme. The list included Bollywood actor Arshad Warsi, his wife Maria Goretti Warsi and brother Iqbal Hussain Warsi.
“The price was systematically pushed upward through collusive trading, followed by aggressive promotional activity to draw in retail investors, and finally, a coordinated sell-off by the promoters,” Sebi said.
The market watchdog has barred Arshad Warsi, Maria Goretti, and 57 entities from the securities market for a period of 1 to 5 years from the date of the order. Additionally, the market regulator directed those involved in the scam to ‘disgorge’ the unlawful gains they have made along with simple interest at the rate of 12 per cent per annum. Notably, Sebi has directed Arshad Warsi and his family to disgorge the Rs 1.05 crore they have gained unlawfully. Sebi has also imposed monetary penalties ranging from Rs 5 lakh to Rs 5 crore on the entities accused of collusive trading to enact the pump-and-dump scheme.
What Is Collusive Trading
Collusive trading involves coordination between multiple entities to modify and manipulate the price of securities such as stocks. This price manipulation then helps the involved parties in unlawfully making gains by engaging in manipulated trades using unpublished price sensitive information sharing, influencing investors to buy or sell stocks and other illegal practices.
How Does Collusive Trading Work
While collusive trading can be used to manipulate gains in multiple ways, one of the more common forms it takes is through the artificial manipulation of stock prices and the pump and dump method.
Let us understand this through Sadhna Broadcast Ltd’s (SBL) example. The market regulator found in its investigation that the promoter group of the company and other linked entities engaged in collusive trading by selling and buying SBL’s stock among themselves to increase its value steadily and give a false appearance of market interest. During the period of Sebi’s investigation (March 8 2022, to November 30, 2022), the price of the stock surged from Rs 1.85 apiece on the BSE on March 9, 2022, to Rs 34.8 apiece on August 16, 2022.
Once the price surges due to the collusive trades, the people who engage in such trades further promote the stock as a viable investment option to lure people into buying it. In SBL’s case, this was done through synchronised advertising and promotional videos, which were uploaded on YouTube channels. YouTube channels such as Moneywise, The Advisor, and Profit Yatra cited the price rise in SBL and promoted it with unrealistic target prices to lure investors into buying the stock for higher returns.
Once sufficient demand for the stock is created in the market, the next part, or the ‘dump’ part of the collusive trading scheme, takes place in which the promoters pare the stake and book their unlawful gains.
In SBL’s case the promoters held 40.95 per cent stake in the company at the beginning of Sebi’s investigation as of March 2022 and pared more than 15 per cent of their stake bringing their stake down to 25.58 per cent as of December 2022. On the other hand the public shareholders of the company grew from 885 to 72,509 as per the Sebi. As of March 31, 2025 the stock has 52,576 public shareholders as per BSE data.
The increased number of retail shareholders who purchased Sebi’s shares ended up losing money as the stock’s value dropped once the promoters pared their 15 per cent stake.
How Investors Can Protect Themselves From Collusive Trading
In a pump-and-dump scam, false and misleading information regarding a company’s stock price is spread through mass media such as social media platforms, online advertisements, email, and newspapers. The misinformation can also be spread through word-of-mouth.
Anand James, Chief Market Strategist, Geojit Investments Ltd told Outlook Money that investors should look out for some ‘red-flags’ to protect themselves from such scams and malpractices when investing money in the stock market. James advised investors to carefully look out for unnatural price spikes and sudden surges in trading volumes after a period of inactivity to protect themselves from collusive trading.
“Some key red flags of pump-and-dump scams include unfamiliar sources of information, unnatural price spikes, and a sudden surge in trading volumes after a period of inactivity. These are simple yet effective indicators that the third category of investors can use to protect themselves,” James said.
James also advised investors to consider looking at websites that provide free data to track promoter holdings.
“Additionally, various websites provide free data to track promoter holdings, spot sudden declines, and verify whether quarterly revenues justify price increases. These factors can serve as further warning signs of manipulation,” James said.
