No evidence to show that Arshad Warsi induced investors in pump and dump case: SAT partly sets aside SEBI order

The Securities and Appellate Tribunal (SAT) partly set aside an interim order passed by the Securities and Exchange Board of India (SEBI) barring Bollywood actor Arshad Warsi and his wife Maria Goretti from accessing the securities market..Warsi and other noticees were penalised for running a 'pump and dump' scheme that involved manipulating the price of a stock through misleading information to lure investors into buying it and then quickly selling the shares at an inflated price..A Bench headed by SAT Chairperson Justice Tarun Agarwala held that the SEBI Whole Time Member (WTM) had passed the interim order in haste and without considering the essential facts. It thus concluded:(i) The appellants (Warsi, his wife Maria, brother Iqbal and talent manager Aahuti Mistry) are not involved in the increase in the price of the scrip(ii) The appellants were not involved in the making/distribution or uploading of the videos on the YouTube channels nor do the appellants feature in such videos. (iii) There is no finding that the appellants are connected to the company, its shareholders or key managerial personnel. (iv) The appellants are not connected with other volume creators or net sellers (v) There is nothing to indicate that the appellants by their conduct had created any interest on any investor to trade in the scrip of Sadhna. (vi) The appellants have not spread any false and misleading information regarding the scrip in question. (vii) There is no evidence to indicate that the appellants had induced unsuspecting investors to buy the scrip in question..Merely because Warsi had a professional connection with Manish Mishra, the primary noticee in the case, it cannot lead to a conclusion that they were engaged in a coordinated scheme to induce investors to acquire securities in the company in question, the order stated."...there is no iota of evidence against the appellants to show that they were engaged in a coordinated scheme to induce unsuspecting investors to acquire securities in the scrip in question.".The Appellate Tribunal thus set aside the directions in the SEBI order to Warsi and Goretti. However, they were restrained from trading in the scrip of Sadhna during the pendency of the investigation. Further, they were directed to deposit 50% of their alleged unlawful gains in an escrow account. For the balance amount, they are required to give an undertaking that they will deposit the balance amount within 30 days from the date of final order, if any, passed by the WTM..SEBI received information on price manipulation and offloading of shares by certain entities in the scrip of a company called Sadhna Broadcast Limited. It was alleged that YouTube videos with false content, backed by a paid marketing campaign worth crores of rupees, were being uploaded to lure people to invest in the company. Once the investors entered the scrip, the said entities offloaded their holdings at an inflated price.Warsi and Goretti were classified as volume creators (VCs) in the case. VCs are the ones who both bought and sold shares of Sadhna during the Examination period, hence contributing to a rise in trading volumes and interest in the scrip.The duo were found to have made profits of ₹29,43,649 and ₹37,56,816 from the buying and selling of shares, respectively..A team of Advocates Amit Agrawal, Sumit Agrawal, Rushin Kapadia, Pratham Darad, Radhika Yadav and Tarun Toprani from Regstreet Law Advisors represented Warsi and Goretti.SEBI was represented by Senior Advocate Gaurav Joshi, who was briefed by a team from Ashar & Co including Advocates Feroze Patel, Mihir Mody, Arnav Misra and Mayur Jaisingh..[Read order]