What is ‘Pump and Dump’ YouTube scheme? SEBI ban on Arshad Warsi, wife Maria explained

Veteran ‘Bollywood’ actor Arshad Warsi, his wife Maria Goretti and 43 other entities were banned by stock market regulator SEBI on Thursday from the securities market. The reason behind the ban was alleged stock manipulation in a ‘pump and dump’ scheme via YouTube. Here’s the fraud scheme and the case involving the actor explained.

What are ‘pump and dump’ schemes?

The so-called Pump and Dump or P&D is a type of securities fraud. It involves inflation of a share’s price through putting out information that is false or misleading. The scammer first buys stocks for a lower price. The value of the stock is then inflated (pumped) before they are sold (dumped) at a higher price. While the scammer comes out with profits, other investors in the stock end up losing money. In the specific case involving the actor, misleading information was allegedly put out through YouTube channels.

What is the YouTube ‘pump and dump’ case?

The case involves manipulation of share prices of two companies Sadhna Broadcast Ltd and Sharpline Broadcast Ltd. As per the allegations, misleading videos on YouTube channels made positive comments about the companies and recommended investors to buy the shares. In SEBI examination between April-September 2022, it found the share prices of the two companies rose between April and mid-July 2022. It found false and misleading videos were uploaded on YouTube related to both companies.

The alleged misleading videos about Sadhna were uploaded on two YouTube channels -- The Advisor and Moneywise -- during the second half of July 2022. Videos about Sharpline were uploaded on -- Midcap calls and Profit Yatra YouTube channels – in the second half of May 2022. Investors were lured to buy the stocks for extraordinary profits, SEBI said. It noted an increase in price and trading volume of the scrip of two firms after the videos were uploaded.

Videos about Sadhna Broadcast Ltd claimed takeover by Adani group, moving from TV production to movie production and Rs 1,100 contract with a US firm. Certain promoter shareholders, key management personnel, and non-promoter shareholders of the company offloaded a significant part of their holdings at inflated prices and booked profits during this time.

What are the allegations against Arshad Warsi?

SEBI has noted that Arshad Warsi made a profit of Rs 29.43 lakh and his wife made Rs 37.56 lakh from Sadhna Broadcast.

Arshad Warsi denies involvement in any share manipulation scheme

Arshad Warsi has issued a clarification asking people not to “believe everything you read in the news”, adding that his and his wife Maria’s “knowledge about stocks is zero”. Warsi claimed that they “took advice and invested in Sharda, and like many others, lost all our hard earned money”.

READ | Who is Maria Goretti Warsi, MTV VJ and wife of Arshad Warsi banned from stock market by SEBI?

(Inputs from agencies)