Dig deep into scamster Ketan Parekh’s case only on ‘Money Mafia’ Season 2
In an anthology of four gripping true financial crime stories, Money Mafia Season 2 brings forth the realities of some of the biggest scamsters India has seen, including Ketan Parekh.
If the Harshad Mehta scam shook the Indian stock market in 1992, it was Ketan Parekh who almost ripped it to shreds, nine years later. The stock broker, who was among the most influential of his time, had some favourite stocks — Pentamedia Graphics, HFCL, GTL, Silverline Technologies, Ranbaxy, Zee Telefilms, Global Trust Bank, DSQ Software, Aftek Infosys, and SSI — which were collectively known by the moniker ‘K-10 stocks’.
Known as the Pied Piper of Dalal Street, Parekh took serious advantage of the loopholes that existed in the stock market back in the day, and rigged it using unlawful means. He siphoned off public funds to the tune of Rs.1200 crore. Moreover, the damage he caused was so serious that The Serious Frauds Investigation Office (SFIO) estimated that the extent of the fraud could touch ₹40,000 crore.
A CA by profession, 2001 wasn’t the first time Parekh was involved in a scam. A serial offender in the stock market, he was also involved in the Canbank Mutual Fund scam of 1992. Ironically, he was mentored by Harshad Mehta, and was a promoter in one of his companies.
But what else was so scandalous about the case? How did it affect the larger population? Let’s delve deep into these questions.
The tremors on Budget day in 2001
The Ketan Parekh scam cannot be spoken about without the mention of the 2001 Budget. At that point, the stock market was already faltering, but it literally ‘collapsed’ post the Budget. Although the Budget presented by then Finance Minister Yashwant Sinha was a popular one, the market nosedived by 176 points.
Parekh majorly traded in the Calcutta Stock Exchange, taking advantage of the lack of regulations. There were rumours doing the rounds about Parekh’s fraud on Budget day, which is what led a lot of people to dump those stocks.
The panic and fear experienced by people has been deftly covered by the documentary Money Mafia Season 2 that airs on Discovery Plus.
As part of the episode on Parekh, Sinha opened up about those times, “The stock market showcases the relationship between the buyer and the seller. If money is available freely as it is today, there will be no end to a jump in share prices. At that point, what some of the market operators including Ketan Parekh were doing was to beg, borrow and steal, and invest in the stock markets, where you got higher returns.”
Where did the money come from?
The funds were secured from banks and financial institutions, and it was the hard-earned savings of the ordinary people that were used to manipulate stock prices. The news of the scam first came into the limelight, when the Bank of India (Mumbai branch) alleged that Parekh had defrauded them to the tune of Rs.137 crore.
In the episode, senior finance journalist Paranjoy Guha Thakurta reveals that Parekh visibly engaged in something called circular trading. By definition, it is a type of securities fraud which causes price manipulation and is often related to ‘pump and dump’ schemes. It occurs when identical sell orders are entered at the same time with the same number of shares at the same price.
In March 2001, Ahmedabad-based Madhavpura Mercantile Cooperative Bank and its officials’ involvement in the scam also came to the fore. Many of its depositors were left in a lurch, as the bank had turned virtually bankrupt.
What happened next?
Parekh was arrested by the CBI, and was accused of insider trading. He was convicted for rigging the markets, and was banned from trading until 2017. In 2009, SEBI also discovered that he was trading through front companies, which led Calcutta Stock Exchange to go into a financial crunch. He was sentenced to rigorous imprisonment in March 2014.
In May 2018, after an 18-year-long legal battle, the Bank of India recovered the entire amount of Rs.137 crore from Parekh.
The last word
Scamsters like Parekh are many, and are present everywhere from minor villages to mighty cities. These scammers' skillful deception is executed perfectly by the best brains for a definite period. Money Mafia, an anthology of 4 gripping true financial crime stories in a short format, depicts the realities of these scams in an entertaining and thrilling narrative structure.
Apart from Sinha and Thakurta, the episode, which is part of Season 2, features Former Chief general Manager SEBI - Pramod Kumar Bindlish, and Co-founder, First global - Shankar Sharma.
To watch the episode, tune in to Discovery Plus!