Mint Explainer: Why has Sebi barred Arshad Warsi from markets again?

He, his wife Maria Goretti Warsi and brother Iqbal Warsi were among 64 individuals and entities named in Sebi's 109-page order, issued on 29 May. 

The order follows Sebi’s March 2023 interim directive, barring Warsi and his wife from the market. However, on appeal, the Securities Appellate Tribunal (SAT) partially set aside the ban that same month.

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SAT restricted the trading ban to the SBL scrip during the investigation and directed the Warsis to deposit 50% of their alleged unlawful gains—over ₹60 lakh—in an escrow account. For the remaining amount, they were required to provide an undertaking to deposit it within 30 days of the final order.

The final order issued on 29 May complies with the SAT directive, ahead of the 31 May 2025 deadline set for concluding the probe.

Several other noticees have challenged Sebi’s proceedings in the Gujarat and Bombay high courts. However, no stay has been granted.

What is the alleged scam?

SBL—renamed Crystal Business System Ltd—was at the centre of a coordinated manipulation scheme that ran from March to November 2022. At the core was a digital campaign run through popular YouTube channels like The Advisor, Moneywise, and Profit Yatra, allegedly operated by Manish Mishra.

These videos falsely projected a turnaround in SBL’s prospects, including claims of an Adani Group takeover and ₹1,100 crore film deals with American companies. These claims were bolstered by manipulated technical analyses that projected target prices of up to ₹340 per share, drawing in retail investors.

The videos were promoted through paid marketing campaigns costing over ₹5 crore, with one video receiving over 14.3 million views before being made private.

“The videos presented SBL as a promising investment opportunity and were timed to coincide with and amplify artificial market activity. The retail investor segment, drawn in by this coordinated push and the misleading perception of active demand, provided the exit liquidity the promoters needed," said the order authored by Sebi whole-time member Ashwani Bhatia.

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As investor interest surged, connected entities linked to promoters and video creators offloaded 16 million shares worth over ₹33 crore.

The promoters, who held 40.95% of the company as of March 2022, sold over 15% of their stake during this phase, reducing their holding to 25.58% by December. Meanwhile, the number of public shareholders jumped from 885 to 72,509.

What was Arshad Warsi’s role?

On 13 July 2022, Arshad Warsi bought 187,000 shares from Jatin Shah, a connected party. Maria Goretti Warsi acquired 265,000 shares the same day. Both liquidated their holdings the next day, earning ₹81.4 lakh and ₹90.2 lakh, respectively.

Warsi claimed he acted on a friend’s tip and was unaware of any wrongdoing. However, the markets regulator said the timing and pricing of the trades, closely aligned with the release of misleading videos, indicated intent and awareness.

The regulator cited WhatsApp chats showing that Warsi “was aware of, and participated in, the manipulation of SBL shares". It said he traded on instructions from Mishra, aiding a pump-and-dump scheme that misled investors.

What are the penalties?

Warsi was fined ₹5 lakh and barred for a year. Other individuals, including intermediaries, YouTube content creators, and entities connected to SBL promoters, face penalties ranging from ₹5 lakh to ₹5 crore.

Collectively, they must disgorge over ₹50 crore in illegal gains, with 12% simple annual interest from the end of the investigation period until payment. Bans from market access range from one to five years.

What are the legal and regulatory implications?

Experts said public figures engaged in manipulative or fraudulent trade practices are liable under Sebi regulations.

“The regulations are not limited to the issuer of securities but also cover any person who induces another person to invest in securities. Hence, celebrities have an obligation to ensure that they do not run afoul of the provisions," said Shubha Yadav, partner at RS Law Chambers.

Yadav also noted that celebrity endorsements of financial products fall under the Consumer Protection Act. “It requires endorsers to ensure that their claims are truthful, substantiated and not misleading," she said.

Experts added that the regulator's order highlights the growing misuse of digital and social media to distort price discovery in the market.

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“Sebi’s reasoning reinforces that the standard of due diligence and accountability is heightened for celebrities and so-called financial influencers (finfluencers) who engage in market-facing conduct, whether through direct endorsements or indirect promotional activities," Yadav said, adding that the regulatory framework makes no distinction between licensed and unregistered individuals.