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Sebi’s ponzi crackdown catches 26 firms within a month

Sebi's ponzi crackdown catches 26 firms within a month

Weeding out illicit money pooling schemes, market regulator Sebi has within a month clamped down on over two-dozen companies that had raised close to Rs 1,000 crore from over 4 lakh investors. 

The Securities and Exchange Board of India (Sebi) has barred all these firms from mobilising further funds from investors, while these companies and their directors have also been restrained from accessing the securities market.

Some of them have also been asked to wind up their existing illegal money pooling schemes and repay investors their money with interest, while further proceedings are underway in many other cases. 

These companies were raising capital through issuance of redeemable preference shares (RPS) and non-convertible debentures (NCDs) and unauthorised collective investment scheme (CIS), without taking necessary regulatory approvals. 

Since November, Sebi has taken action against a total of 26 companies, which could have mopped-up at least Rs 1,000 crore from more than 4 lakh investors, according to an analysis of orders passed by the regulator in this period. Sebi observed that issues made by these firms via RPS/NCDs were made to more than 50 people.

Under the rules, that made them public issues of debt securities requiring compulsory listing on a recognised bourses. They were also required to file their prospectus, which they failed to do.

By indulging in such activities, these firms have also violated the provisions of the Companies Act, besides applicable Sebi regulations. 

Among others, Sai Multi Services, Shree Sai Space Creators, Vee Realties India Ltd, Arise Bhoomi Developers, Garima Real Estate & Allied Ltd, Raghav Capital and Infra and Sheen Agro were garnering money through unauthorised CIS. 

They were running CIS without obtaining registration from Sebi. These firms had raked in unauthorised funds promising high returns to investors. The capital was raised through realty schemes and ‘buffalo purchase’ among others. 

To prevent these 26 firms and their respective directors from further carrying on with unauthorised fund mobilising activity, Sebi has imposed several restrictions on them through separate orders.

Sebi has prohibited firms including Greenworld Agro Industries, Mass Infra Realty, Orchid Cultivation Projects India, Aditya Global Industries and Real Tulip from raising funds from investors through issuance of securities. 

Also, Sebi has asked NVD Solar to refund about Rs 595 crore that the company had illegally raised from the public. 

In addition, Sebi has directed Sheen Agro and Plantations and Shree Sai Spaces Creations to wind up their unauthorised CIS and refund investors’ money. It has set a three-month deadline for these firms to return the money.

Sebi has already taken action in recent years against entities having collectively raised well above Rs 1 lakh crore through various schemes and its crackdown is expected to intensify considerably after grant of new powers.

Through a new Securities Laws Amendments Act, the government has enhanced powers of Sebi to take action against illegal money-pooling activities involving Rs 100 crore or more. The Act also provides for setting up of a special court to expedite the cases filed by Sebi.


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