Why SEBI Banned Actor Arshad Warsi? Know Full Story

The Securities and Exchange Board of India (SEBI) has banned actor Arshad Warsi and others from accessing the securities market for up to five years for participating in a “pump-and-dump” scheme. This is a fraudulent stock market practice and in this article, we will understand about it in detail. SEBI order is also given at last. You can download order PDF also and check details.

A pump and dump scheme is a type of fraudulent activity in the stock market where the price of a low-value or lesser-known stock is artificially increased (“pumped”) through false, misleading, or exaggerated information, only to be sold off quickly (“dumped”) at the inflated price by the people behind the scheme.

What Happened? Why Arshad Warsi was Banned?

SEBI investigated the stock trading activity related to Sadhna Broadcast Limited (SBL) and found that 64 individuals and entities, including Arshad Warsi, his wife, brother, and manager, were involved in a scheme to artificially inflate the company’s stock price and then sell it off at high prices, causing unsuspecting investors to suffer losses.

According to SEBI, false or misleading information was spread about the company to create hype. Collusive and structured trading was done by people connected to SBL’s promoter group to drive up the share price. Not only this, Promotion was also done on social media platforms like YouTube to attract retail (small) investors. All this was done to boost the share price of company.

Once the share price was artificially pushed up, the accused individuals sold their holdings at inflated prices, leaving ordinary investors with overvalued shares.

Key Findings from SEBI’s Order

• The trading was done based on advice from Manish Mishra, who, along with others, played a central role in manipulating not just SBL shares but also shares of VCU Data Management and Banas Finance.
• Mishra also ran a YouTube channel that gave false stock tips, contributing to misleading investors.
• The manipulation strategy followed the classic pump-and-dump model, where share prices are pumped up artificially and then dumped (sold off) once enough buyers enter the market.

Penalties Imposed on Arshad Warsi

• Arshad Warsi, his spouse, brother, and manager have been:
  • Fined ₹5 lakh each
  • Ordered to pay 12% annual interest on the penalty amount
  • Banned from the securities market for 1 year
• Other key manipulators, such as Gaurav Gupta and six others involved in executing structured trades, have been:
  • Banned for 5 years
  • Fined up to ₹2 crore each

All individuals named in SEBI’s order are required to disgorge (return) the unlawful gains and pay the fines within 45 days of receiving the order.

SEBI’s Warning

The regulator has made it clear that market manipulation will not be tolerated, and anyone attempting to mislead or take advantage of small investors will face strict consequences. This action by SEBI sends a strong message that celebrities and influencers are also accountable when they participate in or promote unethical financial activities.

• Download SEBI Order