In one of the largest enforcement drives in recent years, the Securities and Exchange Board of India (SEBI) has launched a wide-ranging investigation into pump-and-dump schemes allegedly executed by over 200 privately listed companies. These entities are suspected of manipulating stock prices through coordinated social media campaigns, followed by mass sell-offs to retail investors.
Background and Context
The crackdown comes amid rising retail investor participation in micro- and small-cap stocks. SEBI, under its growing focus on market conduct and investor protection, initiated the probe after observing suspicious stock price patterns and unusually high trading volumes in illiquid counters—many of which were either dormant or recently revived shell companies.
The regulator’s efforts have expanded dramatically over the past few weeks, with investigative raids taking place across more than 80 premises, the seizure of over 150 mobile devices, and digital forensics conducted on 100+ computers.
Key Developments in SEBI’s Operation
Operation Scope & Enforcement
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Companies under probe: 200+ micro-cap and privately listed firms
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Nature of manipulation: Artificial price inflation (“pump”) followed by mass offloading of shares to retail participants (“dump”)
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Estimated fraud amount: Over ₹3,000 crore (~$35 million)
Enforcement Measures
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Raids: Conducted across 80+ locations
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Evidence collected: Devices, trading logs, WhatsApp conversations, email records
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Targeted tech: 150+ phones and 100+ computers for forensic analysis
Geographical Hotspot
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Most shell firms are Ahmedabad-based, indicating possible regional hubs of coordinated manipulation
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Many used YouTube influencers, Telegram channels, and WhatsApp forwards to create artificial hype around stocks
Timeline and Connected Cases
This enforcement follows similar past actions taken against:
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Pacheli Industrial Finance
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Bharat Global Developers
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LS Industries
In these cases, SEBI issued restraining orders and impounded illegal gains after detecting preferential allotment abuses, false disclosures, and trading collusion.
The current investigations are expected to conclude within 3–6 months, with formal orders likely by the end of 2025.
Market Impact & Investor Risk
Pump-and-dump schemes in India usually follow a typical playbook:
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Identify a low-priced, thinly traded stock (often defunct or newly revived)
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Promote aggressively through social media and fake analyst tips
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Inflate price with coordinated group buying
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Dump large volumes to unaware retail investors
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Leave stock to crash—causing steep losses for late entrants
This practice has left thousands of retail investors—many of whom follow unregulated influencers—vulnerable to sudden wealth erosion.
Expert Commentary
Sandeep Parekh, former SEBI official and Founder, Finsec Law Advisors:
“This is a much-needed move. Market integrity depends on credible price discovery. Such frauds distort prices and shake investor trust.”
Rajiv Singh, Partner, Compliance Advisory Services:
“SEBI is now leveraging digital forensic evidence and real-time analytics, which is a marked improvement from traditional audit trails. Expect faster and more effective enforcement.”
Implications for BFSI Stakeholders
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Retail Investors: Urged to avoid stock tips from unverified sources and be cautious of low-float, high-return promises.
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Brokers & Platforms: May see new regulatory guidelines around penny stock trading and social media compliance.
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Market Intermediaries: Likely to face stricter KYC, UBO disclosure, and trading pattern surveillance norms.
Conclusion
SEBI’s renewed crackdown on pump-and-dump fraud is a strong signal of its zero-tolerance stance on market manipulation. As the regulator deploys advanced surveillance tools and coordinates with enforcement agencies, it is poised to not only penalize wrongdoers but also introduce preventive frameworks to safeguard retail investors.
