The most noteworthy pump and dump stock scheme (fraud)

Last year, On 10 june 2015, Surana Solar shares jumped 18% after it was reported that ‘Rakesh Jhunjhunwala’ purchased 250,000 odd shares & then it crashed to its lower circuit next day, as the true identity of the investor was revealed. As soon as the news was made public, there was frenzy amongst the punters to grab the stock. This sent the stock price surging to an all-time high of Rs. 63. At this stage, the operator dumped his holding of the stock, leading to abnormally high volumes on the exchanges. Later, when news leaked that the “Rakesh Jhunjhunwala” who had bought the stock in the first place is not the ace investor ‘Rakesh Jhunjhunwala’ but a namesake, the stock price plunged to a low of Rs. 32.

It appears that nobody wanted to miss out on a stock that Rakesh Jhunjhunwala had invested in, and everybody from traders to analysts and even journalists assumed that the investment was done by Rakesh Jhunjhunwala. It looked like this was planned, as on 8 June 2015 too, the namesake investor had bought 250,000 shares, but squared off on the same day. This did not seem to get any attention, but when the long position was taken on 9 June, that was when the other investors caught on.


The result is that punters who dived into the stock in the belief that the ‘Rakesh Jhunjhunwala’ had bought the stock are facing huge losses. Retail investors often fall for stock tips or like to take cues from iconic investors like Rakesh Jhunjhunwala. While tracking ace investors may have its own share of risk, acting on information without checking its authenticity can be even worse. Later on SEBI (Securities & Exchange Board of India) came to rescue, as BSE issued a circular dated 12th June 2015 directing its members not to effect any payout to their clients (both funds and securities) for the trading done in Surana Solar on June 10, 2015 and June 11, 2015.

CNBC’s Varinder Bansal broke the news that the “Rakesh Jhunjhunwala” who bought the stock is not the ace investor but a namesake based in Kolkata. Varinder Bansal speculated in his report that the entire episode appears to be a carefully orchestrated ‘pump and dump’ scheme’. In the recent days, considerable number of ‘pump and dump’ activities in the stock market has come under the scanner of market regulator SEBI. SEBI is trying to figure out the best possible ways to reduce the ‘pump and dump’ schemes from the stock market.

After these critics, now no one can ignore this issue by saying ‘What’s in a name?’

(Note: to know more about pump and dump scheme click here: )


Leave a Reply