New Delhi, May 25 -- The Securities and Exchange Board India cracked down on a finfluencer family using a novel method to determine the impact their social-media posts had on stock price movements.
The capital markets regulator, on May 22, passed an interim order banning a family of seven-Hemant Gupta, his present wife and former wife, and their four children-from the market and seizing Rs 20.25 crore as wrongful gains made from an alleged pump-and-dump scam involving 82 stocks.
VCCircle had exclusively reported on SEBI's investigation into Hemant Gupta in early April.
According to the interim order, the regulator's investigations revealed that Hemant Gupta and his sons Rohan and Aniket were operating and benefitting from the scheme while his wife Sharon Gupta, ex-wife Rajani Gupta, and their daughters Leana Gupta and Purvangi Gupta were merely benefitting from it. The scheme involved all of them buying newly listed stocks, particularly SME stocks, then recommending them on social-media platforms such as X and Telegram, and then selling them as the prices rose.
While the family seems to have made a profit of Rs 55.31 crore by trading in these scrips, the regulator has currently impounded less than half of this. This is because the regulator has only impounded gains made from the first two days of posting, after seeing that the posts held the strongest sway in that window of time.
It measured the increase in trading volume before and after the social media posts, over different time periods.
The maximum variance in trading volumes, of 99%, was seen between the two days before the posting date and two days after the posting date. Thereafter, over the next 15 days, the variance between comparable time periods dropped from 54% increase to 37% increase in trading volumes.
As the SEBI order said, the objective of the analysis was to measure the impact of the recommendations, made on X in a particular scrip, on the change in liquidity (increase in trading volume) of that scrip in the market during subsequent trading days.
"While data was analysed up to T+15 days, the T+2 metric is seen to be the most analytically strong," it added.
The order added that the calculation of profits done for the interim order will have "no impact on final determination on investigation". That is, as of now, the gains have been calculated based only on the recommendations made on X, the social media platform earlier known as Twitter.
Further investigation could include the impact of recommendations in these 82 stocks from the posts made on other social media platforms such as WhatsApp and Instagram.
Published by HT Digital Content Services with permission from VC Circle.