Mumbai, Oct 21:
The Enforcement Directorate (ED) has frozen ₹200 crore in trading accounts linked to two companies as part of an investigation into an alleged stock market manipulation scheme, according to a report published on October 20. The action concerns R M Drip and Sprinklers Systems Ltd. and R&B Denims Ltd., which have been under scrutiny over suspected activities involving the artificial promotion of share prices.
The agency conducted searches on October 16 at 29 locations across Ahmedabad, Gandhinagar, Surat, Bhavnagar, Mumbai and Nashik under the Prevention of Money Laundering Act. The premises searched included company offices, residences of promoters, locations connected to individuals who received shares at low prices, and offices associated with stockbroking and finance firms. Investigators also searched premises linked to people suspected of operating groups that promoted the shares.
According to the ED, the suspected scheme involved the issuance of more than 3.5 crore shares and convertible warrants between April 2023 and March 2024 to a relatively small network of connected entities. The shares were subsequently promoted through WhatsApp communities carrying names such as “Multibagger Stocks”, which circulated daily buying tips to retail investors.
Investigators suspect that the promotional messages encouraged retail participation and helped push up the prices of the shares, allowing early holders to sell their holdings at inflated levels. The agency also identified entities including Affluence Gems, Kawa HUF and Komalay Consultancy as potential beneficiaries during the course of its investigation. The allegations form part of an ongoing probe and do not, by themselves, establish guilt.
The ED’s action follows scrutiny by the Securities and Exchange Board of India (SEBI) over suspected manipulation involving the two companies. The freezing of trading accounts is intended to restrict access to funds covered by the agency’s action while the investigation proceeds.
The case highlights the risks faced by retail investors who rely on unsolicited stock recommendations circulated through messaging platforms and social media. Claims of unusually high returns or tips presented as guaranteed opportunities can expose investors to substantial losses, particularly in shares with limited liquidity or sharp price movements.