Fugitive diamantaire Mehul Choksi, wanted in the $2 billion Punjab National Bank fraud, is in the news once again after the Interpol lifted the red corner notice against him.
While the Central Bureau of Investigation (CBI) has asked the Commission for Control of Interpol’s Files (CCF) for restoration of the Red Notice, this is just another instance of a run-in with a regulatory body or an investigative agency for the founder of Gitanjali Gems — a stock that was the darling of the stock market between 2010 and 2012.
A probe by the Securities and Exchange Board of India (Sebi), however, found that the stupendous rise in the stock price was allegedly due to manipulative trades and front entities of Choksi, who faced the ire of the capital market regulator.
In October 2022, Sebi barred Choksi from trading in the stock market for a period of 10 years post a probe into the trading of shares of Gitanjali Gems by certain entities between the period July 2011 and January 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.
More importantly, the entities included Choksi and few others from the promoter group as well. Incidentally, trading in the shares of Gitanjali Gems is currently suspended.
“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.
The Sebi order further highlighted the findings that allegedly showed that Choksi, through front entities, tried to corner the shares to reduce the quantum of shares available for trading for the public. Further, these entities allegedly created large positions in the derivatives segment as well.
Interestingly, the Sebi order also stated that Choksi did not rebut the findings.
It was, however, 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.
Shares of Gitanjali Gems were listed on the bourses in March 2006. From around ₹200 levels, the shares surged to a high of ₹480 in 2007. In 2013, the shares had touched a high of Rs 650 before falling to a low of ₹43.75 the next year and becoming a penny stock in 2018.
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