Till date how many scams has the stock exchange experienced?

Question

Taklk about how much money they involved?

Answer 1

Major Stock Scams

MUNDHRA SCANDAL : 1957

It was the media that first hinted there might be a scam involving the sale of shares to LEC, Feroz Gandhi sources the confidential correspondence between the then Finance Minister T.T. Krishnamachari and his principal finance secretary, and raised a question in Parliament on the sale of 'fraudulent' shares to LIC by a Calcutta-based Marwari businessman named Haridas Mundhra. The then Prime Minister, Jawaharlal Nehru, set up a one-man commission headed by Justice M.C.Chagla to investigate the matter when it become evident that there war a prima facie case. Chagla concluded that Mundhra had sold fictitious shares LIC, thereby defrauding the insurance behemoth to the tune of Rs. 1.25 crore. Mundhra was sentenced to 22 years in prison. The scam also forced the resignation of T.T.Krishnamachari.

THE SECURITIES SCAM : 1992

The man who seemed to own the sobriquet Big Bull, and whose Toyota Lexus became the subject of reams of column -cms in the media, leveraged a loophole in the country's banking system to siphon funds from banks (using banker's receipts) and used the money to ramp up the prices of shares. The scam was uncovered in April 1992 and the Sensex came crashing down from a peak of 4,467.32 on April 22 of that year to 3,896.90 on April 28. It caused ripples in Parliament, and quantum of money involved was placed in excess of RS 3,000 crore, but unlike the Mundhra scam where justice was swift, the judicial processes related to the Mehta scam continue to drag on to this day although the man's sudden demise on December 31,2001 (he was 47) could change that. In a bizarre twist, a few months before Mehta's death, the CBI filed a case against him and his Ashwin Mwhta for allegedly selling the shares of their clients in their possession and later claiming that these very shares were stolen from their offices when their properties were in the court's possession. Harshad Mehta also had another brush, albeit a minor one, with stock market infamy, in 1998, but that's another story. At the time of his death, ascribed to a cardiac arrest, Mehta had been in jail for over 50 days over the missing shares issue. Intriguingly, one of the other people involved in the scam, UTT's M.J.Pherwani, also died abruptly due to a heart attack in 1992.

MS SHOES SCAM : 1994

Anyone who war old enough in 1994 to read will remember the advertisements- tens of them intriguingly headlined: 'Who is Pawan Sachdeva?' For the record, it was the peak of the public issued-led advertising boom and the ads were created by the Delhi branch of Rediffusion. Sachdeva, the promoter of MS Shoes, allegedly used company funds to buy shares (of his own company ) and rig prices, prior to a public issue. He is alleged to have colluded with officials in the Securities Exchange Board of India (SEBI) and SBI Caps, which lead-managed the issue, to dupe the public into investing in his RS 699-crore public-***-rights issue. Sachdeva was later acquitted.

CRB SCAM : 1997

Another scam forged by greed and discovered through accident. Chain Roop Bhansali, a smart-talking entrepreneur, created a pyramid financial empire based on high-cost financing. At its pek, his RS 1,000-crore financial conglomerate had in its ranks a mutual fund, a financial services company into fixed deposits, and a merchant bank. That Bhansali knew how to work the system became evident when he also managed to secure a provisional banking license. Then his luck ran out. An executive in the State Bank of India Inadvertently discovered that some interest warrants issued by Bhansali were not backed by cash. The bubble finally burst in May 1997, but by that time investors had lost over RS 1,000 crore. This was among the first retail scams in India and it was played out, in smaller avatars, across the country-especially in the South where financial services companies promised returns in excess of 20 per cent and decamped with the principal. Bhansali was arrested for a few weeks and released later on bail.

MEHTA'S SECOND COMING : 1998

The Big Bull returned to the bourses. This time, he allegedly colluded with the promoters of BPL, Videocon International, and Sterile Industries to rig the share prices of these companies. The inevitable collapse happened sooner than planned, Mehta orchestrated a cover-up operation that included a high=jinks effort by officials of Bombay Stock Exchange to (illegally ) open the trading system in the middle of the night to set things right, but the damage had been done. SEBI finally passed its ruling on the scam in 2001, banning the three companies concerned from tapping the market-BPL, for two years. Mehta was debarred for life form dealing in Securities Appellate Tribunal (SAT) in October 2001

VANISHING COMPANIES SCAM : 1998

A passing remark heard by then Finance Minister Palaniappan Chidambaram resulted in a furore over what was badly-kept secret on Dalal street. Chidambaram was told that hundreds of companies had disappeared after raising moneys form the public. An informal scrutiny revealed that perhaps over 600 companies were missing. Chidambaram ordered a probe by SEBI. The SEBI probe conducted in May 1998 revealed that while many companies are not traded on the bourses at least 80 companies that had rises Rs.330.78 crore were simply missing. Later that year, the Department of Company Affairs (DCA) was asked to probe and penalize these companies. DCA still investigating. Investigations continue to this day.

PLANTATION COMPANIES SCAM : 1999

It was as innovative a swindle as any effected in the world. Savvy entrepreneurs convinced gullible investors that given the right irrigation and fertilizer inputs, teak, strawberries, and anything else that could be grown, would grow anywhere in the country. The promoters could afford to collect money from investors and not worry abut retribution (or returns, for that matter). For, plantation companies fell under the purview of neither SEBI nor Reserve Bank of India. Indeed, they didn't even come under the scope of the Department decided to change things in 1999, enough investors had been gulled: 653 companies, between them, had raised RS 2,563 crore from investors. To date, not many investors have got their principals back, just another affirmation of the old saying about money not growing on trees.

KETAN PAREKH SCAM : 2001

Ketan Parekh's modus operandi wasn't very different from Harshad Mehta's. If Mehta used banker's receipts, then Parekh used pay orders to ramp up the prices of his favourite scrips (the K-10). Apart from money form the banking system Parekh also rerouted money from corporated like HFCL (RS 425 crore), and Zee (RS 340 crore) to good effect. He was caught when pay-orders issued by Madhavpura Mercantile Cooperative Bank bounced. Although the total amount involved in the scam was just RS 137 crore, the impact was far greater.

Apparently, when a bear cartel sensed Parekh was in trouble , it stepped in and leveraged a dip in the Nasdaq to bear down stock prices. The resultant slump in the markets happened soon after Finance Minister Yashwant Sinha presented what he considered his best budget ever. Under pressure from the government, SEBI investigated the scam and heads began to roll. Among them: the entire management team of BSE, including its president Anand Rathi, CSFB, First Global, and, in an indirect connection, P.S.Subramanyam, the Chairman of UTL Evidently, for the 18 months that PSS was Chairman of UTI, the Trust had mirrored the actions of the bullcartel. The result ? when the market tanked, so did the NAV of its holy cow, the US-64.

Answer 2

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