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PCJ Insider Trading Scam:
The share of PC Jewellers was running upwards almost throughout the 2017, yet something drastically changed in 2018. To be precise, since Jan 19, 2018, the jewellery chain from New Delhi lost over 75% of its market value in just 4-5 months, which was worth thousands of crores.
How did seemingly strong business of 90 outlets across 70 Indian cities, and brand ambassadors which included Akshay Kumar, Kriti Kharbanda; turned into such a bad stock?
What led to such a downfall?
It all started in January 2018 when Mumbai-based financial and technology company Vakrangee bought shares in PC Jeweller. However, none of the exchange filings showed who the shares were bought from.
Then, in April, the company disclosed in a filing to the stock exchange that one of its promoters, Padam Chand Gupta, had gifted some of his shares to his family members through off-market transactions. This triggered concerns over transparency and the quality of disclosures by PC Jeweller.
Now SEBI got suspicious and began investigation, The regulator noted that late Padam Chand(founder owner) and Balram Garg (Ex MD) communicated UPSI (Unpublished Price Sensitive Information) with regard to the proposal for buyback of equity shares and its subsequent withdrawal to Shivani Gupta(Daughter In Law), Sachin Gupta(Son), Amit Garg(nephew) (all relatives of PCJ family) and QDPL(A firm).
This in SEBIs eyes amounted to a basic insider trading case.
With such news going around, the PCJ stock had already wiped out 83% capital of investors by May 3, 2018.
But as usua SEBI took too long to pass its order. On May 11, 2021 fined these four a total of 1 crore and barred them from trading for 1 year and specifically in PCJ share for 2 years.
However this ruling was challenged in Supreme court by Balram Garg and the case has turned out to be a historic Insider Trading case as SEBI’s order was quashed based on the fact that SEBI has failed to establish that Insider Trading had occured, further court noted that the burden of proof of allegation of Insider Trading lies on SEBI.