Sebi Uncovers Ketan Parekh’s Elaborate Front-Running Scandal: Cash, Hawala, and NPI
Ketan Parekh, one of India’s most notorious stock market manipulators, has found himself at the center of yet another major stock market scandal. In 2024, Sebi uncovered Parekh’s elaborate front-running scheme, which involved hawala networks, non-public information (NPI), and a web of illicit trading activities. The investigation, which spanned multiple locations, revealed how Parekh used a network of agents to manipulate market conditions, benefiting from privileged insider information.
Key Highlights:
How Sebi Tracked Parekh’s Operations
Sebi’s investigation into Ketan Parekh’s stock market activities uncovered an intricate network of mobile phones, front entities, and hawala agents that allowed him to manipulate the markets undetected for years. The trail began with Parekh’s visit to Sebi’s office in 2023, where he submitted his Aadhaar card and a mobile number linked to his wife. Using these numbers, Sebi investigators were able to track Parekh’s movements and uncover his covert operation.
Mobile Phone Tracking & Call Data Records
Sebi’s use of mobile phone tracking and analysis of call data records (CDRs) played a pivotal role in connecting Parekh to a network of front runners. Investigators found at least 10 mobile numbers registered under different names that were consistently located at Parekh’s residence in Mumbai, leading to the discovery of his involvement in multiple illegal trading operations.
The Role of Rohit Salgaocar
Rohit Salgaocar, a Singapore-based trader, was another key figure in Parekh’s operation. Salgaocar provided Parekh with non-public information (NPI) regarding the trades of a large foreign portfolio investor (FPI), referred to as the “Big Client.” Parekh, in turn, communicated this valuable information to front runners who executed trades based on the insider tips.
Front-Running and Hawala Networks: The Network Unfolds
The Front-Running Scheme
Sebi’s investigation revealed a classic pattern of front-running, where front runners would execute buy or sell orders before the Big Client placed their trades. This manipulation led to significant price movements in specific stocks, allowing front runners to profit from the movement of prices. Parekh and Salgaocar orchestrated this strategy using illicit NPI and a web of brokers, entities, and agents.
The Role of Hawala Agents
To facilitate his illegal activities, Parekh relied on hawala networks, known for moving cash outside the formal banking system. This cash was used by brokers to execute trades on Parekh’s behalf, further deepening the layers of illegal activity. The investigation found that several brokers, such as GRD Securities and Salasar Stock Broking, were involved in facilitating these trades.
Sebi’s Action and Unlawful Gains
Investigating Multiple Locations
Sebi’s investigation spanned over 20 locations, with the bulk of the illegal activities linked to Parekh’s operation in West Bengal. The search and seizure operation yielded critical evidence, including trading data, bank account statements, and WhatsApp chats between the accused. The illicit trading activities were found to have resulted in unlawful gains amounting to Rs 65.77 crore.
Sebi’s Order and Consequences
In response to the findings, Sebi issued an order against 22 entities connected to Parekh. This included brokers, front runners, and entities operating in the hawala network. The actions of these individuals and firms were deemed to have contributed to the manipulation of the Indian stock markets, and they now face penalties and restrictions imposed by Sebi.
The Connection Between Ketan Parekh and the Big Client
Flow of Non-Public Information (NPI)
Sebi’s investigation established that the Big Client, a US-based fund, often consulted with Rohit Salgaocar for advice on which stocks to buy or sell. Salgaocar, in turn, passed this NPI to Parekh, who used the information to direct front runners on executing trades. The Big Client’s trades, when placed, aligned with the front runners’ positions, allowing Parekh and his network to profit unjustly.
The Involvement of Brokers
Brokers like Motilal Oswal and Nuvama Wealth Management played a significant role in executing the trades of the Big Client. Sebi found that these brokers were in direct communication with Salgaocar, who provided them with the NPI before placing orders on behalf of the Big Client. The front runners then used this information to trade ahead of the Big Client’s transactions, profiting from the insider knowledge.
Sebi’s investigation has uncovered a sophisticated front-running operation led by Ketan Parekh, in which insider information, hawala networks, and a web of brokers and front runners were used to manipulate the stock market. With the help of mobile phone tracking, data analysis, and testimony from key witnesses, Sebi has been able to trace the flow of non-public information and take action against the involved entities. The case serves as a stark reminder of the lengths to which some individuals will go to exploit market systems for personal gain.
The Hindustan Herald Is Your Source For The Latest In Business, Entertainment, Lifestyle, Breaking News, And Other News. Please Follow Us On Facebook, Instagram, Twitter, And LinkedIn To Receive Instantaneous Updates. Also Don’t Forget To Subscribe Our Telegram Channel @hindustanherald
