SEBI’s Big Catch: Ketan Parekh and the ₹65 Crore Heist
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In today’s edition of The Daily Brief:
Ketan Parekh Strikes Again
India's Critical Minerals Roadblock
Ketan Parekh Strikes Again
A recent investigation by the Securities and Exchange Board of India (SEBI) uncovered a major front-running scam worth around ₹65 crores in the stock market. And to everyone’s shock, the man at the center of it all was none other than Ketan Parekh. You’ve probably heard of him — back in 2001, he orchestrated one of the biggest scams in India’s stock market history.
A former associate of Harshad Mehta, Ketan Parekh was infamous for artificially inflating the prices of popular stocks in industries like IT, media, and telecom. He then tricked institutional investors into pouring money into those stocks. The amount involved in that fraud is believed to be as high as ₹40,000 crores.
The fallout was massive back then. SEBI, the CBI, and the Serious Fraud Investigation Office (SFIO) all went after him. He was barred from trading in the stock market for fourteen years and even spent three years in jail.
But now, he’s back! This time, he built a carefully crafted network that used insider information and coordinated trades to make profits at every step.
In this story, we’ll break down what this scam was all about, how it worked, who was involved, and how SEBI pieced the puzzle together to crack the case. And, as always, we’ll also look at how this impacts the broader market — and you and us as investors.
Before we dive into the details, let’s first understand the core of this scam: front-running.
For those who are new to the markets, front-running is a type of market manipulation where someone takes advantage of confidential information about large, upcoming trades to make their own profits.
Here’s a simple example: Imagine a big investor is about to buy a stock. This will likely push the stock price up. If someone gets secret information about this trade in advance, they can buy the stock first and sell it after the price goes up, pocketing a quick profit. Front-running is illegal because it’s unfair and undermines the trust and integrity of the stock markets.
Now, back to the scam. There were five key players in this story — three were actively involved, while two didn’t realize they were being used.
Ketan Parekh: After being banned from the stock markets for 14 years, he’s back as the mastermind behind this scam. He organized a complex network to profit from insider information and is at the center of this scandal.
Rohit Salgaocar: A Singapore-based intermediary who helped foreign clients trade in India. Thanks to his role, he had access to confidential trade details and passed this information on to Ketan Parekh.
The Big Client: This was a large U.S.-based foreign portfolio investor making massive, legitimate stock trades in India. They unknowingly became the foundation of the scam.
The Front Runners: These were Ketan Parekh’s associates, including brokers and corporate accounts. Acting on his instructions, they executed trades based on insider information.
Indian Brokers: Companies like Motilal Oswal and Nuvama Wealth Management facilitated the Big Client’s trades. They had valid agreements with Rohit Salgaocar and paid him commissions for bringing in the business. However, like the Big Client, they were unaware their systems were being exploited.
This scam was a carefully planned, multi-layered operation designed to make money at almost every step. Let’s break it down step by step in simple terms:
1. Leaking Non-Public Information (NPI)
The first part of the scam involved leaking sensitive information.
The Big Client we mentioned earlier relied on Indian brokers to carry out its trades in the Indian market. Rohit Salgaocar acted as the go-between in this process. Because of his role, he had access to crucial details about the Big Client’s trades, such as:
Which stocks they wanted to buy or sell?
How many shares and the price range they were targeting?
When the trades were planned to happen.
Instead of protecting this sensitive information, Salgaocar passed it along to Ketan Parekh.
2. Front-running with Sensitive Information
With this leaked information in hand, Ketan Parekh took the next step: front-running. Here’s how it worked:
Step 1: Parekh’s network, which included brokers and corporate accounts, would buy stocks that the Big Client was planning to purchase—but they did it before the Big Client could.
Step 2: When the Big Client’s large orders hit the market, they pushed up the stock prices. Parekh’s network then sold their holdings at a higher price, pocketing the difference.
Let’s look at a quick example:
Suppose the Big Client planned to buy 1 lakh shares of a stock at ₹100 per share. Parekh’s team would jump in first and buy the shares at ₹100.
When the Big Client’s massive order came through, it pushed the stock price up to ₹105. That’s when Parekh’s team would immediately sell their shares, making a quick ₹5 profit per share.
3. The Role of Counterparties
Now, let’s talk about the third layer of the scam: counterparties.
In the stock market, every trade needs someone on the other side. If you want to buy a share, someone else has to sell it to you at the same time. This becomes especially tricky for large trades in less liquid stocks, where finding enough buyers or sellers is tough.
Counterparties solve this problem. They can be individual traders or institutions that step in to take the other side of a big order, ensuring the trade happens smoothly.
In this case, Rohit Salgaocar used Ketan Parekh’s associates as counterparties for the Big Client’s trades. Essentially, Parekh’s network was directly involved in fulfilling the Big Client’s orders, making the scam even more efficient.
Basically, if the Big Client wanted to buy a stock, Parekh’s network would step in and sell it to them. This ensured they made a profit on the transaction.
Similarly, if the Big Client wanted to sell a stock, Parekh’s network would buy it, knowing they could sell it later at a higher price and make a profit that way too.
In fact, according to a statement Rohit Salgaocar gave to SEBI, about 90% of all the counterparties he arranged were from Ketan Parekh’s network itself!
4. Cash settlements through the Angadiya network
And that brings us to the fourth layer of the scam: cash settlements through the Angadiya network.
As you can imagine, running a scam isn’t easy. There’s always a risk of getting caught, so people often look for ways to keep their operations under the radar.
In this case, Ketan Parekh relied on the Angadiya network. This is an old, informal system used to move money or valuables between places. It’s commonly trusted by jewellers and traders to safely and quickly transport cash or precious items.
While this system isn’t strictly regulated, it has been around for generations, built on strong trust and personal relationships within the network. By using the Angadiya network, Ketan Parekh could quickly settle profits with his associates and move money without leaving any trace in the formal banking system.
Now that we’ve covered all the basic pieces, let’s talk about how SEBI uncovered this scam.
The investigation started when SEBI noticed unusual trading patterns. The Big Client’s trades were often preceded by similar trades from other accounts, which immediately raised red flags.
Here’s how SEBI pieced it all together:
SEBI analyzed thousands of trades and found a clear pattern.
Parekh’s network consistently traded in the same stocks as the Big Client, just minutes before the Big Client’s orders were executed.
These trades were highly profitable, which strongly suggested that someone had access to insider information.
SEBI carried out search and seizure operations at 17 locations, uncovering key evidence. They seized:
Mobile phones and electronic devices.
Trading records and financial documents.
SEBI also decoded WhatsApp chats and pseudonyms that were used to hide the scam.
Ketan Parekh used multiple phone numbers and nicknames like “Jack” and “Boss” to coordinate the operation. The WhatsApp chats revealed:
Real-time instructions to his network on which trades to execute.
Evidence of his communication with Rohit Salgaocar.
SEBI then connected all the dots by following the trail of money. They uncovered:
Cash movements through the Angadiya network.
Profit-sharing among Parekh’s associates.
It’s important to note that the investigation isn’t over yet. This case is still in its early stages. However, to protect the markets and maintain investor trust, SEBI acted quickly by issuing a temporary order:
Ketan Parekh, Rohit Salgaocar, and others involved were immediately barred from trading.
They were required to close all existing derivative positions within three months.
SEBI is continuing to dig deeper to ensure no other parties involved in the scam are overlooked.
In summary, the Ketan Parekh scam is a stark reminder that some individuals will go to great lengths to exploit the financial system. While SEBI’s vigilance brought this operation to light, it also shows the ongoing need for strict oversight and accountability in the markets.
For investors like us, this case is a valuable lesson. While markets rely on trust, it’s always worth staying aware and questioning who might be pulling the strings behind the scenes.
India's Critical Minerals Roadblock
The government recently put up 21 mining sites for auction, offering access to valuable minerals like nickel, tungsten, copper, gold, and rare earths. These minerals are crucial for modern technology. But here’s the problem—most of these sites didn’t attract enough interest. Seven sites failed to get the minimum three bids required by law, and four got no bids at all. As a result, the auctions for those sites had to be called off.
At first, this might sound like just another piece of news, but if you dig a little deeper, it’s clear why this is such a big deal for India’s future.
The world is changing fast. We’re moving towards electric vehicles, renewable energy, advanced computer chips, and modern gadgets powered by high-tech batteries. All these technologies rely on certain minerals—often called "critical minerals"—like lithium, nickel, cobalt, copper, and rare earth elements, along with others such as gallium and germanium. If we want to build the technologies of tomorrow, we need to secure these minerals today.
For a long time, oil has been called the lifeblood of the global economy. But now, critical minerals are taking center stage. In the future, the countries that have access to these minerals—or can process them—will hold a lot of power, just like oil-rich nations do now.
At the moment, China dominates the critical minerals race, extracting and processing the majority of the world’s supply. Meanwhile, India relies heavily on imports for almost everything—from lithium to nickel—and spends enormous amounts of money to get these resources from other countries.
Faced with the risk of falling behind, India has been stepping up its efforts to find and mine its own mineral deposits. One key strategy has been to auction off mining sites to companies, including international players, hoping they’ll extract these minerals on a large scale. But the results so far have been disappointing. Out of 49 sites auctioned to date, only 24 received successful bids. This suggests many mining companies don’t see India as a worthwhile place to invest.
So, why isn’t India more attractive to mining companies?
1. Insufficient Exploration
One major reason is that we haven’t explored these sites thoroughly before putting them up for auction. Mining companies need detailed information about the quality and quantity of minerals at a site before committing large sums of money. However, many of these sites have only undergone preliminary surveys, leaving a lot of uncertainty about what’s actually there. For mining companies, this is a big gamble. Nobody wants to spend years and huge amounts of money only to discover that the site doesn’t have enough valuable minerals to make it worth the effort.
2. Red Tape and Regulations
Another challenge is the complex regulatory environment. India has a long list of rules and paperwork that companies must navigate to start mining. This includes securing multiple clearances — environmental, state-level, and more.
Mining is already a risky business. It requires enormous investment upfront, and the returns can take decades to materialize. On top of that, mines are often unpopular with local communities because they can harm the environment and displace people. Unexpected political or legal hurdles—like a state government objecting to a project after it’s been approved by the central government—make things even harder for companies.
These challenges aren’t unique to India, but the combination of insufficient exploration and regulatory hurdles makes the process here especially difficult for mining companies.
Add insufficient exploration and red tape to the mix, and it’s easy to see why investors might hesitate.
Despite these setbacks, India hasn’t given up. The government is making changes to mining laws and promoting the exploration of critical minerals. We’ve joined international partnerships like the Mineral Security Partnership (led by the US) to reduce our dependence on China. There’s also a growing focus on investing in research and data collection, so future auctions can give buyers a clearer idea of what they’re bidding on.
India’s challenge now is to convince large mining companies that it’s worth their time and money to invest here. A key step is ensuring that our mining sites are thoroughly explored—whether by the government or private players—so that companies aren’t bidding on a mystery. Streamlining regulations and cutting through the red tape could also help attract more companies, including international ones.
While the government’s intentions are in the right place, turning these plans into reality is no easy task.
This is a critical moment for India. If we don’t figure out how to secure critical minerals for ourselves, we’ll remain dependent on other countries for the raw materials that power future technologies. But if we can tackle these challenges—by improving exploration, making smarter rules, and creating a stable, welcoming environment for investors—we could become a key player in the global critical minerals market.
It’s a race against time. As the demand for electric vehicles, solar panels, and advanced electronics grows, so does the need for critical minerals. India can’t afford to stand by while other countries dominate this space. For the sake of energy security, economic growth, and self-reliance, we must find a way to extract and process these minerals in a practical and sustainable way.
That’s the bigger story behind the recent failed auctions—and why they’re so important to watch.
Tidbits:
Blinkit has launched a "10-minute ambulance" service in select areas of Gurugram, deploying five ambulances equipped with lifesaving tools like oxygen cylinders, AEDs, and emergency medicines. CEO Albinder Dhindsa mentioned plans to expand the service to other cities over the next two years. This move marks Blinkit's diversification into healthcare, enhancing its social impact by addressing critical gaps in emergency medical access. The service is bookable via the Blinkit app, further integrating essential services into its platform.
India’s sugar consumption for the 2024-25 sugar year (SY) is projected at 28 million tonnes (mt), down 1.5 million tonnes from the previous year, driven by the absence of election-linked demand. Domestic sales quota for the first four months of SY 2024-25 is 0.7 million tonnes lower compared to the same period last year, according to the Indian Sugar and BioEnergy Manufacturers Association (ISMA). Sugar production in the first quarter of the current marketing year dropped 16% to 9.5 million tonnes, compared to 11.3 million tonnes a year ago, primarily due to a decline in Maharashtra.
Coal India Limited (CIL) reported a 2.2% YoY increase in production, reaching 543.4 million tonnes (MT) during April-December FY25 compared to 531.9 MT last year. December 2024 production rose 0.7% YoY to 72.4 MT, while coal offtake grew 1.6% YoY to 561.2 MT during the same nine-month period. Despite a production target of 838 MT for FY25, CIL is likely to achieve 822-823 MT due to challenges in land acquisition and environmental clearances, as noted by Chairman PM Prasad.
-This edition of the newsletter was written by Pranav and Anurag
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Good read... Looking forward for what you guys put out. Cheers!
Thanks for these wonderful insights