Fugitive diamantaire Mehul Choksi, wanted in the $2 billion Punjab National Bank fraud, is in the news again after the Interpol lifted the red corner notice against him.
While the Central Bureau of Investigation CBI has asked the Commission for the Restoration of the Red Notice, this is just another instance of a run-in with a regulator or an investigative agency for the founder of Gitanjali Gems a stock that was the darling of the stock market between 2010 and 2012.
A probe by the Securities and Exchange Board of India Sebi found that the stupendous rise in the stock price was due to manipulative trades and front entities of Choksi, who faced the ire of the capital market regulators.
In October 2022, Sebi barred Choksi from trading in the stock market for a period of 10 years after a probe into the trading of shares of Gitanjali Gems by certain entities between the period July 2011 and January 2012.
The investigation revealed that around 21 suspected entities that were connected, known or related to each other were traded in the shares of Gitanjali Gems.
The entities that were included included Choksi and a few others from the promoter group as well. The shares of Gitanjali Gems are currently suspended.
The Investigation further revealed that the entities that were taking position in the scrip of GGL in both the cash and derivatives segments of the investigation period were acting as fronts on behalf of the Noticee, Shri Mehul C. Choksi, who was the Chairman and Managing Director of GGL during the Investigation Period.
The findings that were alleged to have shown that Choksi tried to corner the shares to reduce the amount of shares available for trading for the public were also highlighted by the Sebi order. These entities have also created large positions in the derivatives segment.
The Sebi order also stated that Choksi did not rebut the findings.
It was not the first time that the capital markets regulators acted against Choksi. In January 2022, the watchdog stopped Choksi from accessing the securities market for a period of one year for violating the provisions of the SEBI Prohibition of Insider Trading Regulations, 2015.
In March 2006, shares of Gitanjali Gems were listed on the bourses. The shares surged to a high of 480 in 2007 from around 200 levels. The shares had reached a high of Rs 650 in 2013 before falling to a low of 43.75 the next year and becoming a penny stock in 2018.