SEBI Defreezes Bank Accounts of Santosh Singh Karki in Superior Finlease Matter

Moneylife Digital Team 25 August 2023

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has ordered the defreezing of the bank accounts of Santosh Singh Karki, one of the noticees, whose accounts were frozen by SEBI in January 2023 for indulging in price manipulation in the scrip of Superior Finlease Ltd (SFL).

In an order, Ashwani Bhatia, whole-time member (WTM) of SEBI, says, "... considering the prayer made by the applicant 2 (Santosh Singh Karki) and 3 (Anita Karki), who are husband and wife, citing personal difficulties being faced by them on account of the freezing of their bank accounts, and considering that the value of the securities lying in the demat accounts of the said applicants is adequate to cover the amount that may be disgorged, I am inclined to grant some relaxation to at least one of the applicants, from directions in the interim order."

"It is noted that even if a margin of 50% is imposed on the total value of securities, as provided in the table below, it would be sufficient to cover the individual disgorgement liability of the applicant 2 (Mr Karki). Given the same, I am inclined to consider defreezing his bank accounts," the SEBI order says.

The Karkis had requested that, as sufficient funds to cover the disgorgement amount were lying in their demat accounts, SEBI may consider unblocking their bank accounts.

Mr Bhatia noted that the information submitted by the Karkis corroborates with the information obtained by SEBI from the depositories and mutual fund transfer agents. "Further, it is noted from the interim order that the amount directed to be disgorged by Mr Karki and Ms Karki amounts to Rs23.16 lakh and Rs26.78 lakh, respectively. It is also noted that in terms of the directions contained in paragraph 61 of the interim order, the direction to impound was made applicable to the 19 noticees, jointly and severally."

On 25 January 2023, SEBI passed an interim order cum show cause notice (SCN) against 19 entities for their alleged role in manipulating the price of the scrip of SFL.

SEBI had impounded unlawful gains of Rs2.14 crore earned from 1 February 2021 to 13 September 2021 by manipulating the share price of SFL and Rs1.75 crore generated by way of dumping the shares of SFL on the recommendation day, i.e., 14 September 2021.

The SEBI investigation found that a recommendation to buy the shares of SFL was made on 14 September 2021 via two Telegram channels operated by Arvind Shukla, notice 5 in the interim order. It noted that the top 11 sellers in the scrip, who had cumulatively contributed 92% of the total market volume on 14 September 2021, were prima facie found to be connected to noticee 1 (Rajneesh Kumar, director of SFL), as per the interim order. These connections were observed based on KYC documents, fund transfers, and call records. It was also noted that eight out of the top 11 sellers were trading through India Finance Guaranty Ltd (IFGL), where Mr Kumar was a director.

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