Brightcom Group – Set To Become a Case Study of Fraud & Manipulation
The unprecedented second interim order of the market regulator against  the Brightcom Group Ltd (Brightcom) on 22nd August had no surprises for discerning investors, analysts or commentators. It is a bit like Byju’s—everybody had seen it coming for over a year. And yet, the sheer audacity of the fraud, collusion, stock price manipulation and disregard for rules that have been unearthed so far makes this a case study on par with the notoriety of Dinesh Dalmia’s DSQ Software group, Ramalinga Raju’s Satyam Computers and other scandals that will be documented for posterity.
 
There is the added dimension this time. Brightcom appears to have used its core competency—digital marketing—to take advantage of the swarm of post-COVID traders who are desperate to make quick money. These traders, who operate as social media gangs, get easily swayed by media-savvy smart operators and dismiss all allegations of wrongdoing or past regulatory action as mere ‘technicalities’. As always, the mainstream media adds to the confusion by playing both sides. It will report regulatory action when it happens, but also promote wrongdoers without disclosures or context.
 
Brightcom’s very history and background is a series of red flags that kept serious investors away: frequent name changes, going back to 1999, when it was founded; repeated change in business profile and core business as well as strange acquisitions; a stunning unexplained price rise of 2500% in 2021; and, repeated dodgy disclosures and account practices.
 
Although the stock price declined over 75% from the fake high of 2021, Brightcom, which continues to be a part of the NSE 500, was still trading robust volumes (over 1.91 crore at around Rs24) on 22 August 2023. Indeed, well after it was clear that the company is completely shady and the stock had collapsed to around Rs9, after a series of continuous lower circuits, it shot up three times in a matter of seven weeks in May and June 2023.
 
After the second interim order of the Securities and Exchange Board of India (SEBI), which includes a ban on the founder of First Global, Shankar Sharma, hailed by mainstream media as market guru, the stock has opened and stayed down at the lower circuit on 23rd August, where over 37 lakh shares were traded in the first two hours. In other words, Brightcom still had buyers for 37 lakh shares even after SEBI’s second order. Let’s look at this with a quick recap about the group and the regulatory action.
 
Background: The Hyderabad-based company was set up in 1999 as an e-greetings company called USA Greetings 2000. It later became Lanco Global Systems Ltd until 2008, after which it called itself LGS Global Ltd. This company amalgamated itself with an unlisted company, Ybrant Digital Ltd, in 2012 and changed its name Ybrant Digita. It called itself Lycos Internet Ltd in October 2014 and was listed on the stock exchange in 2015. In September 2018, Lycos changed its name to Brightcom Group Ltd. In this entire period, the group had announced a series of global acquisitions and many of these entities continue to exist in different parts of the world bearing earlier names of the company. Brightcom now called itself a digital marketing expert.
 
Latest Order: The regulator’s latest order has restrained Suresh Kumar Reddy, chairman and managing director (CMD) and Narayan Raju, chief financial officer (CFO) from holding any directorial positions until further notice. These two, as well as Shankar Sharma of First Global, along with 22 other individuals and entities have been prohibited from disposing their shares until further notice.
 
SEBI’s 73-page order had deep-dived into Brightcom’s preferential allotments to just 22 out of 82 allottees. The order makes it clear that a more detailed investigation continues but, in the interim, lays bare the following:
 
1) Brightcom round-tripped funds through a series of entities which helped route funds to the promoter group, some applicants were given a full refund of money paid through layering transactions.
 
2) Brighton falsely claimed to have received full payment for preferential shares/warrants by providing ‘forged and fabricated bank statements’ to SEBI.
 
3) Preferential allottees, including Shankar Sharma, have either not paid for the shares, made a part payment or have got their money refunded.
 
4) Four limited liability partnership (LLPs) companies (Aradhana Commosales, Kalpana Commosales, Sarita Commosales and Shalini Sales) that were allotted shares were categorised as promoter  entities after the preferential allotment with the CMD making himself a partner in each of them. This allowed the group to circumvent the prescribed lock-in period for promoters.
 
5) A few hundred crore rupees advanced as loans to subsidiaries was partly siphoned off or remains unaccounted. Some advances, claimed to be loans to subsidiaries, were false or overstated.
 
6) Brightcom loaned money for purchase of shares which is in violation of Section 67 of the Companies Act, 2013.
 
7) The statutory auditors, M/s P Murali & Company and M/s PCN & Associates, apart from failing to report outright fraud, colluded in fabrication of information and falsification of accounts. SEBI has asked them to dissociate from the company and all its subsidiaries.
 
8) Even the registrar and share transfer agent (RTA) of Brightcom, M/s Aarthi Consultants Private Limited, was an associate of the auditors, completing the incestuous equations.
 
Although the detailed exercise by SEBI in tracking circular transactions is commendable, the order has not shocked anyone except, maybe, the digital ‘fan clubs’ who were used to hype such stocks. After all, Brightcom’s audacious flouting of rules has been documented by analysts for over a year, to the point that the regulator appeared toothless until now.
 
Investors would recall that, on 16 September 2021, Brightcom was ordered to conduct a forensic audit of its accounts to ‘verify manipulation of books of accounts of the company and its subsidiaries, misrepresentation, including of consolidated financials and business operations, wrongful diversion or siphoning of company funds by promoters, directors and key managerial persons…’ It informed stock exchanges about this order only in February 2022—nearly six months later (Read: SEBI Orders Forensic Audit in September 2021, Brightcom Group Informs Exchanges Now). That should have been a huge wake up call for serious investors.
 
On 13 April 2023, SEBI issued its first order barring promoters and senior management from selling shares, after discovering massive accounting fraud and manipulation of financial statements. It also barred them from disposing their shares (Read: SEBI Raps Brightcom Group, Promoter-Directors for Manipulating Account Books; Asks To Submit Statement of Impact of Non-compliances)
 
In June 2023, SEBI slapped Rs40-lakh fine on six, including Brightcom group and its promoters, in insider trading investigation (SEBI Slaps Rs40 Lakh Fine on 6 Including Brightcom Group, its CMD and Promoters for Flouting Insider Trading Rules).
 
SEBI’s whole-time director (WTM), in that order, had called it a large fraud and said, "The fact that the promoters gave themselves preferential allotment of shares which led to them increasing their shareholding from 3.51% to over 18.47% after the start of the SEBI investigation speaks volumes of their intent to mislead and their brazen approach towards self-enrichment.”
 
For investors, the headline contribution of the second interim order is that Noticee No.25 is Shankar Sharma and that he has paid only Rs39.98 crore of the Rs56.66 crore due from him for preferential allotment of 1.5 crore shares on conversion of warrants. Here, too, a part of the payment—Rs14 crore—has not been verified, since Mr Sharma provided redacted documents to the regulator. The order documents 10 efforts by the SEBI via emails and summons to seek information from him.
 
Only the naïve would continue to have faith in the company and continue to trade in the stock after the series of revelations that began in February 2022. That they continue to do so, is perhaps a reflection on the quality of investors in the market today. They continue to repose faith in the company and the vested interests who talked-up the stock and expect that it will bounce back. After all, millions of shares were still being bought after the second SEBI order.
 
 
Comments
rajesh01mbd
8 months ago
Due to poor laws in share market fraudster have high spirits do not forget elder pharmaceutical fraud,After a period of ten years no one jailed for a month.
adityag
9 months ago
Moral of the story: Never invest in a Hyderabadi company.

It's amazing that Telangana continues to be the fraud capital of India.
suketu
Replied to adityag comment 8 months ago
not entirely false but we need to check in detail before investing using our own research.
ravich.b123
Replied to adityag comment 9 months ago
Most of Gujarat Company's also doing pump and dump. DON'T INVEST SHARE MARKET. BIG PLAYERS ARE NOT GENUINE, HE IS NO.1 FRADESTER
ravich.b123
9 months ago
Brightcom Group promoters 30% TAX Paid to Government ( indian Gov. partnership 30% ) . This scam doing Corparate and GOVERNMENT ALSO INVOLVING. MAJOR ROLE IS GOVERNMENT. ONLY LOOSING MONEY RETAIL PEOPLES.
Kamal Garg
Replied to ravich.b123 comment 9 months ago
30% income/corporate tax is the standard and only tax slab applicable for companies. What is great or unusual about it and how GoI becomes a partner in your business when you pay tax. When I pay my income tax, does GoI become partner with me in life's endeavour and career. Not able to understand.
ravich.b123
Replied to Kamal Garg comment 9 months ago
Think different , if 100000 Retail people booked profit in BCG. HOW MUCH he paid tax slab not more than Avarage 10 percent. Government got tax less than 10%.

If 100000 Retail people loose booked , same time who will make it profit not more than 50 big players. This big player paid tax slab 30% to government. This is the logic of 95% Retail people loosing money in stock market. If 95 % Retail People profit booked in stock market. Government got very less tax. So government is not a Retail people side. Government is support to Corparate Crimalls.
bon.appetite.chennai
9 months ago
Brilliant and factual article as always ????????????.
Abhijit.saha91
9 months ago
Every noticees should go to jail immediately...how dare to make such fraud...
sharma.radheyshyam9
9 months ago
Did SEBI ever warned the brokers or retail investors to be away from buying the shares of BCG? Still there are buyers of these shares even after locked in the lower circuit When fraud is there trading
must have been stopped. Once put under surveillance got clearance after some time. What does it mean.
adm24x7
9 months ago
Why is SEBI not suspending the trades in BRIGHTCOM why is it allowing the retail share holders loose their money. Tomorrow the Promotors or People like Shankar Sharma will accumulate at very low price and the poor retailers book looses. Once the action on the company is concluded, the trading can resume
aakashgoel
9 months ago
Will Shankar ever go to jail? If yes, will he stay there to give company to Rana Kapoor?
adm24x7
9 months ago
Why was the share out of Surveillance and then after two days the SEBI acts. Are SEBI guys hand in glove
smgficonsult
9 months ago
The above explains only about the misdeeds, fraud, cheaters,, here the pertinent question is why Sebi, was sleeping, all these days & , why they have not monitored their fictitious activities.. And there is nothing is said about the innocent gullible investors, & sebi apart from barring, why it has not suggested the government to initiate criminal procedure against, those who have fabricated fake bank statements, under ipc 420 ,. And lastly it is incomplete with any comment about, any possibility for take over of BCG as in case of Satyam.by good entrepreneurs.
raviskolathur
9 months ago
The crucial question is he still holding those preferential shares or has booked whopping profit on them. There has to be deterrent disgorgement and penalty imposed on all crooks who cheated the markets and the public. Investor community in India is pathetically weak when compared to the USA.
raviskolathur
9 months ago
EBI has obtained bank statements directly from the banks to arrive at their conclusions. This is becoming a farce that the bank statements submitted by the accused need to be matched and reconciled with the bank statements obtained directly by SEBI.
I think there is also a case for the banks to file criminal cases against the accused by fraud and counterfeiting their logo and letterheads to mislead public and the regulatory authorities. Oh.. there is plenty of material to obtain a court verdict and put these accused guys into the cooler for several years. But does our regulatory and judicial systems have the will, energy, and speed to do so?
pallavoorsubramanian
9 months ago
There seems to be no end to the scams involving such crooks who easily get away. Investors are also to be blamed. Despite repeated failures and promoters doing the vanishing act, they don't seem to learn anything. So long as such investors are present these crooks will thrive. Less said he better about SEBI. It always acts after the horse has bolted.
northguleria
9 months ago
Why is this Scamster Shankar Dubai Sharma ..not getting banned by SEBI even after yrs of nefarious Scams he is involved in ...from Himachal Futuristic to what not ...and he comes on TV ....and every Diwali he is interviewed by CNBC / Zee Biz / ET NOW etc giving him Legitimacy !
Kamal Garg
9 months ago
I wonder why such glaring wrongdoings go unreported in mainstream media despite so many pointers for outright wrongdoing and regulator's action on them.
Array
Free Helpline
Legal Credit
Feedback