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STOCK MARKET SCAM

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The scam is in essence a diversion of funds to the tune of over Rs. 3500 crores from the banking

system to brokers for financing their operations in the stock market

SCHEMING

CRAFTY

AGGRESSIVE

MALICIOUS

Scam ?Scam ?

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Scams In The PastScams In The Past • In 2007, SEBI accuses 16 entities along with promoters of Atlanta of price manipulation

• A group of operators, in 2007, rigs shares of Nissan Copper, which got listed in December 2006

• In 2006, Roopalben Panchal and her associate Deepak Panchal created forged identities and opened D-Mat accounts

• The 176-point Sensex crash on March 1, 2001 by ketan parekh

• Harshad Mehta scam in 1997 wiped off Rs 4,200 crore from the market

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Ketan Parekh ScamKetan Parekh Scam • The 176-point Sensex crash on March 1, 2001

• Known as 'Bombay Bull'

• Rs 120-crore scam at the Calcutta Stock Exchange.

• Accused of making brisk share purchases prior to March, 2001, through his associates

• Arrested on December-2,2002 in kolkata

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Factors that helped KPFactors that helped KP FUND RAISINGFUND RAISING

Formed a network of brokers from exchanges like the ASE and the Formed a network of brokers from exchanges like the ASE and the CSECSE

Purchase share in the name of poor people living in the shanty towns of Purchase share in the name of poor people living in the shanty towns of Mumbai Mumbai

Rs 250 crore loan from Global Trust Bank, though Global Trust’s Rs 250 crore loan from Global Trust Bank, though Global Trust’s Chairman Ramesh Gelli Chairman Ramesh Gelli

Rs 1,000 crore from the Madhavpura Mercantile Co-operative BankRs 1,000 crore from the Madhavpura Mercantile Co-operative Bank

IDBI Bank and IFCI had extended loans of Rs 1,400-odd crore to IDBI Bank and IFCI had extended loans of Rs 1,400-odd crore to companies known to be close to Ketan Parekh companies known to be close to Ketan Parekh

KP borrowed money from various companies like HFCL and banksKP borrowed money from various companies like HFCL and banks

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Modus OperandiModus Operandi His financing methodHis financing method

Bought shares when they were trading at low prices

Saw the prices go up in the bull market while continuously trading

Price was high enough, he pledged the shares with banks as collateral for funds

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Aftermath of the ScamAftermath of the Scam Immediate action by SEBIImmediate action by SEBI

BSE President Anand Rathi's (Rathi) resignation added to the downfall BSE President Anand Rathi's (Rathi) resignation added to the downfall

The scam shook the investor's confidence The scam shook the investor's confidence

By the end of March 2001By the end of March 2001

At least eight people committed suicide At least eight people committed suicide

Hundreds of investors were driven to the brink of bankruptcy Hundreds of investors were driven to the brink of bankruptcy

It also raised questions about the validity of dual control of co-operative banks It also raised questions about the validity of dual control of co-operative banks

The Global Trust Bank and the Madhavpura Cooperative went bust because the The Global Trust Bank and the Madhavpura Cooperative went bust because the money they had lent to Ketan had sunk money they had lent to Ketan had sunk

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Harshad MehtaHarshad Mehta Scam Scam• Big Bull of the trading floor

• His favorite stocks included• ACC • Apollo Tyres • Reliance • Tata Iron and Steel Co. (TISCO) • BPL • Sterlite • Videocon.

• Rs 4,000 crore Scam

• Rigged up the prices of three stocks - BPL, Videocon international and sterlite industries

• Arrested on June 5, 1992

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Factors that helped HarshadFactors that helped Harshad

Fund raisingFund raising Channeled money from the banking system. Channeled money from the banking system.

The Bank of Karad (BOK) and the Metorpolitan Co-operative Bank The Bank of Karad (BOK) and the Metorpolitan Co-operative Bank (MCB) issued fake BRs, or BRs not backed by any government (MCB) issued fake BRs, or BRs not backed by any government securities securities

Using the ready forward (RF) deal which is a secured short-term Using the ready forward (RF) deal which is a secured short-term

(typically 15-day) loan from one bank to another(typically 15-day) loan from one bank to another

Modus operandi was similar to that of ketan’sModus operandi was similar to that of ketan’s

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Aftermath of the scamAftermath of the scam Rs 600 crore were swiped from the State Bank of India Rs 600 crore were swiped from the State Bank of India

A lot of banks were left holding BRs which did not have any value A lot of banks were left holding BRs which did not have any value

Due to panic selling and close to Rs 5,000 crore worth of market Due to panic selling and close to Rs 5,000 crore worth of market capitalization was eroded capitalization was eroded

The index fell from 4500 to 2500 representing a loss of Rs. The index fell from 4500 to 2500 representing a loss of Rs. 100,000 crores in market capitalization.100,000 crores in market capitalization.

withdrawal of about Rs. 3,500 crores from the marketwithdrawal of about Rs. 3,500 crores from the market

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One2millionSimplifying Equity Investments