The long con behind a fake “Zerodha” SMS

**Akshara** (0:04)
In today's episode, we'll break down two important stories. First, we'll talk about why a gas cylinder stock exploded, and then we'll talk about whether India's smallest businesses are getting loans. Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Friday, 3rd July.
Coming to the first story.
So on paper, Maurya Udyog Limited makes steel gas cylinders. Back in 2017, its shares traded at roughly 10 rupees a piece. There was little reason for it to go any higher. This was a small listed company with no obvious growth story behind it. But slowly, it started climbing. Not dramatically, but steadily and without any obvious explanation.
The company hadn't announced any new factories. It saw no sudden earnings jump. And there were no corporate announcements that would justify a re-rating. Nothing in the underlying business seemed to explain what the share price was doing. Yet it kept rising past 50, past 100, past 200, until it touched rupees 255 Account for a 1-10 stock split while reading the prices here. Now at that point, the stock got a lot of attention from major brokers, or at least so it seemed. Because traders began getting messages recommending that they buy the stock from what on the surface looked like ICICI securities or even your own friendly neighborhood brokerage, Sirota. At the same time, websites with names like midcapgains.in and mbstocks.in pushed the same stock. And the public rushed in. In just a few days, trading volumes for the stock on BSE jumped more than 16-fold. In fact, this was the story of many different stocks. Vishal Fabrics, 7NR Retail, GBL Industries, Darjeeling Ropeway Company, all of them saw the same pattern. Something smelled off, and it seemed suspicious enough that SEBI began looking in. So when the regulator finally came out with its order on June 30th, it described having uncovered a scheme on almost industrial scale. Now, the most obviously suspicious link in this chain were the messages. It was clear that these were spoofed and brokers didn't actually send them. But, who did? So there are companies that help you carry out bulk messaging campaigns called SMS resellers. These companies buy wholesale SMS credits and give these out to anyone that wants to run a messaging campaign. Whoever was sending these messages had used the services of these companies. Now, the resellers had never met the person that had placed these orders. Everything had come to them online. But the orders had a digital trail. WhatsApp messages, emails, online payments, all of them pointed back to one person, Hanif Shaikh. Only Hanif denied everything, and those numbers didn't belong to him, he claimed. At one point, he attributed everything to an entity called Darshan Orna, and later his explanation shifted to a staff member named Inayat Dheria. But the more Sebi looked, the more suspicious he looked. They saw KYC filings, Yahoo account recovery emails, IMEI device identifiers, and cell tower data.
Everything came back to him. He made flight bookings from that phone, he had a Swiggy account linked to the phone, and the same device was used to book a Zomato order to a hotel where he was staying at the time. There was simply too much linking Hanif to those messages. But bulk SMSes were only the tip of the iceberg. So by itself, a bulk SMS recommending some obscure microcap would perhaps have done very little. Those messages had built themselves atop a base, and these weren't dead stocks. They were stocks that had seen a meteoric rise over the better part of a year. And those messages worked because they seemed to confirm a story of a stock that in the case of Maurya Udyog, had shot up 25 times in a few months. So why did the stock move in the first place? Now, there was something fishy in the lead up to these SMS campaigns. In the case of Maurya Udyog, for instance, 11 entities had been trading its price up for a long time. They would place orders within seconds of each other, often in tiny quantities, at prices just above the stock's last traded price. The resulting movement looked organic, and the stock, to naked eyes, would appear to be on an uptrend. But was there any fraud here? SEBI had run into this wall before. In many cases before this, people had made synchronized trades, often sending up the price of a stock. But to courts and tribunals that heard them though, this was hardly enough evidence. Buying a stock wasn't fraud, selling one wasn't fraud. So if SEBI claimed that such a series of transactions somehow amounted to fraud collectively because of how they were timed or because of what their effect was, it needed to prove it. So for this, SEBI pointed to a few things. One, those 11 entities seemed suspiciously close to each other. They shared the same addresses, phone numbers and bank accounts, and money seemed to move between them.