SEBI Bans Arshad Warsi, 44 Others For Share Price Manipulation Via Misleading YouTube Videos

Hyderabad: The Securities and Exchange Board of India (SEBI) has barred Bollywood actor Arshad Warsi, his wife Maria Goretti, and 43 others from the securities market due to alleged manipulation of share prices of two listed companies - Sadhna Broadcast Ltd and Sharpline Broadcast Ltd - via the dissemination of misleading and false information in YouTube videos.

The regulator, in two separate interim orders issued on Thursday, outlined a sophisticated scheme in which the accused exploited the reach and influence of social media, specifically YouTube, to spread false narratives about the financial prospects of the two companies. These videos were aimed at luring unsuspecting retail investors to buy, and they (all of the accused) could sell their holdings at inflated prices and make illegal profits.

The Modus Operandi

As per SEBI, the deceptive videos were posted in the second half of May 2022 for Sharpline Broadcast and in July of 2022 for Sadhna Broadcast. The YouTube channels that perpetrated these misleading statements are 'The Advisor', 'Moneywise', 'Midcap Calls', and 'Profit Yatra'.

These videos contained falsified statements, for example:

- Sadhna Broadcast Ltd is going to be acquired by the Adani Group.

- Sadhna Broadcast Ltd is moving from television production to film production.

- A foreign investor has signed a Rs 1,100 crore deal to jointly produce devotional films in India.

The foreign investor would provide the funds, and Sadhna Broadcast would keep the rights to the films. To provide some legitimacy to these fake claims, misleading thumbnails and images, one of them being of the industrialist Gautam Adani and other random images (from local brands) were used.

The fake claims have had a substantial effect on investor sentiment, leading to a sharp spike in price and volume on both of the shares. SEBI's investigation found that the total number of shareholders (mostly small shareholders) in Sadhna Broadcast went from 2,167 to 55,343, and with Sharpline Broadcast, it went from 517 to 20,009, which reflects the huge amount of retail investor activity that was taking place over the time the misleading videos were being uploaded.

The Entities Involved

SEBI categorised the 45 entities into various roles:

- Creators of the YouTube channels (such as Manish Mishra)

- Net sellers/promoters and profit-makers (NSs)

- Volume creators (VCs) like Arshad Warsi, Maria Goretti, and Iqbal Hussain Warsi

- Information carriers (ICs) who were responsible for spreading misleading information

According to the regulator, these groups worked in tandem to create artificial interest and volume in the scrips, misleading the public and then profiting from the inflated prices.

Profits Made And Actions Taken

Actor Arshad Warsi reportedly earned a profit of Rs 29.43 lakh, his wife Maria Goretti gained Rs 37.56 lakh, and Iqbal Hussain Warsi made Rs 9.34 lakh. Collectively, the accused made illegal gains amounting to Rs 54 crore.

In response, SEBI has:

- Banned all 45 entities from buying, selling, or dealing in securities in any form, either directly or indirectly, until further notice.

- Impounded the illegal gains and ordered that the funds be deposited in an escrow account.

- Advised the accused against the sale, transfer, or disposal of any assets, whether movable or immovable, including funds in bank accounts, without prior SEBI clearance.

SEBI indicates the above actions are interim in nature, based on prima facie conclusions. SEBI is still engaged in continuing investigation and may take further action based on the final results.

Market Integrity At Stake

The market regulator declared that the blatant misuse of social media to communicate false information and to drive a market has heinous implications for breaching the Prohibition of Fraudulent & Unfair Trade Practices (PFUTP) norms.

"These actions not only disrupt fair market conduct but also result in significant losses to retail investors who are misled into making ill-informed investment decisions," SEBI noted in its orders.

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