In a decisive ruling on a high-profile front-running case involving Axis Mutual Fund, markets regulator Sebi has barred former Axis Mutual Fund chief dealer Viresh Joshi and Dubai-based trader Prijesh Kurani from the securities market for seven years.
Alongside the market ban, Sebi directed that Rs 30.56 crore already impounded in the case be treated as disgorgement and transferred to the Investor Protection and Education Fund (IPEF), reported Economic Times.
Additionally, the noticees must pay a Rs 12 per cent annual interest on their unlawful gains, calculated from the end of the investigation period up to the date of deposit.
Passed on July 24, Sebi’s final order concluded that Joshi leveraged his position as chief dealer to access non-public, price-sensitive details regarding Axis MF’s impending trades and shared them with Kurani.
According to the order, Kurani subsequently executed trades using various accounts ahead of Axis MF’s big orders to lock in profits by squaring off positions later. The regulatory probe examined trading activities conducted between September 1, 2021, and March 31, 2022, reported ET.
The investigation was carried out after Sebi’s internal alert system flagged front-running patterns connected to Axis Mutual Fund transactions.
The regulator said the scheme involved a network of people and entities. It said Joshi was the information source, Kurani placed the trades, and others helped arrange trading accounts or allowed their accounts to be used.
Key facilitators identified in the order include Sumit Desai, Pranav Vora, and Vaibhav Pandya, who assisted in setting up mule accounts and providing trading infrastructure.
Furthermore, Sebi also found that front-running transactions were routed through accounts registered to Dharini Kurani, Rekha Kurani, Bharti Godaya, M K B Bespoke Audio General, Nishil Marfatia, Olga Trading, Bhavin Shah, Rupal Shah, and Visa Capital Partners.
Mechanics of the front-running scheme
Sebi categorized the front-running trades into two main execution patterns –
- Buy-Buy-Sell Pattern: The front-runner bought shares right before Axis MF placed its large buy orders and subsequently sold them at higher prices after the fund’s market order moved the stock price up.
- Sell-Sell-Buy Pattern: In this pattern, the front-runner sold shares prior to Axis MF’s large sell orders and bought them back at lower prices after the price moved lower.
Sebi said Kurani placed trades using trading terminals of Marfatia Stock Broking and Woodstock Broking from Dubai. The execution across numerous interconnected accounts demonstrated repeated pattern of taking positions right before Axis MF placed its orders, reported ET.
The regulator said the evidence included trade logs, call records, WhatsApp chats, statements of noticees, trading terminal data and references to coded identities such as “Jadugar”.
Sebi emphasized that Joshi’s involvement went far beyond being a passive leak; he masterminded and directed the entire scheme, coordinated closely with Kurani, oversaw trading moves, and helped funnel illicit profits through a Dubai entity. Similarly, Kurani operated as the central offshore execution arm, managing connected accounts while masking the ultimate beneficiaries.
Sebi emphasized that Joshi’s involvement went far beyond being a passive leak; he masterminded and directed the entire scheme, coordinated closely with Kurani, oversaw trading moves, and helped funnel illicit profits through a Dubai entity.
Similarly, Kurani operated as the central offshore execution arm, managing connected accounts while masking the ultimate beneficiaries.
The total unlawful profits were calculated at Rs 30.56 crore, with the highest gains generated through Visa Capital Partners at Rs 14.07 crore.
Nishil Marfatia’s account saw gains of Rs 3.08 crore, Olga Trading Rs 3.01 crore, Dharini Kurani Rs 2.79 crore, Bhavin Shah Rs 1.98 crore, M K B Bespoke Audio General Rs 1.83 crore, Rupal Shah Rs 1.42 crore, Rekha Kurani Rs 1.40 crore and Bharti Godaya Rs 96.65 lakh, reported ET.
Penalties and market bans
Sebi handed down tiered market bans based on individual involvement:
- 7-year market ban: Viresh Joshi, Prijesh Kurani, Dharini Kurani, Rekha Kurani, Bharti Godaya, M K B Bespoke Audio General, and Bindesh Kurani.
- 5-Year Market Ban: Sumit Desai and Pranav Vora.
- 3-Year Market Ban: Vaibhav Pandya, Nishil Marfatia, Olga Trading, Krunal Khamar, Kamlesh Dhanrajani, Bhavin Shah, Rupal Shah, Visa Capital Partners, Suresh Jajoo, Vimla Jajoo, Ankit Jajoo, and Sheepra Kabra.
