The Securities and Exchange Board of India (Sebi) has barred Mehul Choksi of Gitanjali Gems from trading in the stock market for a period of 10 years post a probe that allegedly found him indulging in creating false and misleading appearance of trading in the shares of Gitanjali Gems.
The order follows a Sebi probe into the trading of shares of Gitanjali Gems by certain entities between the period July 18, 2011 and January 25, 2012.
The investigation revealed that around 21 suspected entities – who were connected, known or related to each other – traded in the shares of Gitanjali Gems. These included Choksi and few others from the promoter group.
“Investigation further revealed that the entities… who were taking position in the scrip of GGL in both the cash and derivatives segments during the Investigation Period, were acting as fronts on behalf of the Noticee, Shri Mehul C. Choksi, who was the Chairman and Managing Director (MD) of GGL during the Investigation Period,” stated the Sebi order.
“Mehul Choksi, through Front Entities, tried to capture / corner the shares available in the market during the IP (Investigation Period) to reduce the shares available for general investors which subsequently increased after the Front Entities sold the shares in the market. Further, the Front Entities cornered the position limits in the scrip of GGL by building up substantially large position in the derivatives segment ranging from 15.70% to 56.65% of the Market Wide Position Limit,” added the Sebi order.
The Sebi order further highlighted the fact that Choksi did not rebut the findings, which “clearly establishes” his role in “creation of false and misleading appearance of trading in the scrip of GGL by using and funding the Front Entities in executing manipulated trades.”
This is not the first time that the capital markets regulator has acted against Choksi. In January 2022, the watchdog had restrained Choksi from accessing the securities market for a period of one year for violating the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015.
Interestingly, the Sebi order, while citing publicly available information, stated that Choksi “has fled the country on January 4, 2018 and is stated to be residing in Antigua and Barbuda” even as several cases have been filed against him in India following the Punjab National Bank scam.
Sebi, in its latest order, has also imposed a monetary penalty of Rs 5 crore on Choksi.
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