Misleading YouTube videos backed by paid marketing campaign worth crores to manipulate scrip

The recent uncovering of misleading YouTube videos being used to manipulate stock prices came after the Securities and Exchange Board of India received certain complaints wherein it was alleged that there was price manipulation and offloading of shares by certain entities in the scrip of Sadhna Broadcast Limited.

The said complaints alleged that misleading YouTube videos with false content, backed by paid marketing campaign worth crores of rupees for additional reach, were being uploaded to lure investors.

Once these unsuspecting investors entered the scrip, the said entities allegedly offloaded their holding at an inflated price, the SEBI order found.

As per its Annual report, Sadhna is engaged in the business of launching television channels and to carry out the business of T.V. news, films, music, serials, etc. As per the Shareholding pattern for March 2022 available on BSE website, the promoters of the company were Gaurav Gupta, Shreya Gupta, Pooja Aggarwal, CEO of Sadhna, Varun Media Pvt. Ltd., Tajinder Kaur and Saurabh Gupta, as per the SEBI order.

There was a spurt in the price and volume of scrip of Sadhna between April 2022 to mid-July 2022.

During the second half of July 2022, false and misleading videos ("YouTube Videos") about the company were uploaded on two YouTube channels namely, "The Advisor" and "Moneywise".

These YouTube videos peddled false and misleading news to recommend that investors should buy the Sadhna stock for extraordinary profits, SEBI said.

These YouTube Channels had lakhs of subscribers and the misleading YouTube videos had crores of viewership aided by promotion through paid advertising campaigns.

Subsequent to the release of the misleading YouTube videos, there was an increase in the price and trading volume of the Sadhna scrip. The volumes appear to have been contributed by large number of retail investors likely influenced by the misleading YouTube videos, the SEBI order said.

During this period, certain promoter shareholders, key management personnel of Sadhna, and nonpromoter shareholders who held more than 1 per cent of shareholding in Sadhna offloaded a significant part of their holdings at inflated prices and booked profits, the order said.

The YouTube Channels - The Advisor and Moneywise - were created on July 26, 2021. The Home page of the said YouTube channels has no description about the channels or its creators.

The YouTube Channels earlier allowed only one-way communication from the creators of the channel who upload videos or post messages while subscribers and viewers can only view such video or message. Subscribers and viewers are disabled from posting any comments on the videos uploaded on the said channels.

The mobile numbers of the creators/administrators of YouTube Channels, namely, The Advisor and Moneywise, were found to be registered in the name of Manish Mishra. It is observed that the channels publishing these videos have a large following and the videos uploaded by them were viewed by lakhs of users, SEBI said.

It was observed that the videos contained false and deceptive statements about the growth story and future prospects of the company. The videos recommended investors to buy the scrip to earn substantial profits. Disabling the comments section on the YouTube Channels, prima facie appears to be an attempt to avoid any negative counter view to the messages disseminated through the YouTube videos.

It was also observed that the two videos in the Channel - "The Advisor" and one video in the Channel - "Moneywise" was uploaded after the company, Sadhna Broadcast, made an announcement on July 18, 2022 refuting the claims circulated in social media platforms. This prima facie reinforces the suggestion that there was a deliberate attempt to mislead and induce investors to deal in the scrip of Sadhna, SEBI order said.

By suggesting an abnormally high target price for the scrip, the videos prima facie appears to be egging on the viewers/ potential investors to acquire shares of Sadhna immediately. Further, it can be prima facie inferred that the large expenditure towards advertising the YouTube Channels was, inter alia, designed to lure investors to view the YouTube Channels / videos, SEBI said.

As a result, the number of subscribers of the said YouTube Channels increased rapidly and the number of viewers of the YouTube videos for both the YouTube Channels together added up to more than three crores.

Misleading YouTube videos with false content, backed by paid marketing campaign worth crores of rupees for additional reach, were being uploaded to lure investors in the scrip of Sadhna Broadcast, SEBI has found.

Once these unsuspecting investors entered the scrip, the said entities allegedly offloaded their holding at an inflated price.

SEBI has barred Bollywood actor Arshad Warsi and his wife Maria Goretti among 45 individuals and companies from the securities market following this order.

There was a spurt in the price and volume of scrip of Sadhna between April 2022 to mid-July 2022. A significant portion of the volume during this period was the result of the trades executed by some of the Noticees to this case.

According to the SEBI, Arshad Warsi made a profit of Rs 29.43 lakh, Maria Goretti earned a profit of Rs 37.56 lakh, and Iqbal Hussain Warsi made a gain of Rs 9.34 lakh.