SEBI Cracks India's First Major Spoofing Case Involving 173 Stocks And A Broker
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SEBI has ordered PWAPL to disgorge over Rs 3.22 crore in illegal gains after unearthing a large-scale spoofing operation; What is spoofing?
In a landmark move, the Securities and Exchange Board of India (SEBI) has ordered Patel Wealth Advisors Pvt Ltd (PWAPL) and its associates to disgorge over Rs 3.22 crore in illegal gains after unearthing a large-scale spoofing operation—a manipulative trading practice used to create false demand in stocks.
SEBI has barred PWAPL from trading in the securities market through its proprietary account. Additionally, the company's directors have been prohibited from accessing the market, marking one of the most significant enforcement actions in India against this kind of market manipulation.
The regulator's order, issued on April 28, revealed that PWAPL's spoofing activities were not only extensive but also spread across both the cash and derivatives segments, a first for India in terms of scale. SEBI's investigation found that spoofing occurred in 173 scrips over 292 trading days, with 621 unique instances—sometimes multiple times in a single session—between April 2019 and March 2022.
What is Spoofing?
Spoofing is a deceptive trading tactic that involves placing large orders (buy or sell) on one side of the order book without the intention of executing them. These phantom orders, placed well below or above the market price, create the illusion of strong demand or supply. This misleads other investors, prompting them to trade, after which the spoofer cancels the original orders and profits by executing trades on the opposite side.
SEBI Whole-Time Member Kamlesh Varshney explained: 'Order spoofing is a manipulative practice where traders place and then cancel large buy or sell orders to mislead the market. This artificial pressure on the order book distorts market prices and induces unsuspecting investors to take positions, allowing the spoofer to profit from the resulting price movement."
Varshney emphasised the urgency of passing an interim order due to PWAPL's repeated manipulation on both the buy and sell sides. 'Allowing PWAPL to continue these spoofing activities would severely erode the integrity of the securities market and harm investors," he noted.
He further called spoofing a 'fraudulent and unfair trade practice" that deceives other market participants and undermines price discovery and market efficiency.
While SEBI had previously flagged a smaller spoofing case involving Nimi Enterprises in 2023, that incident was limited to the cash segment and spanned only eight months. The PWAPL case marks the first major crackdown involving both market segments and a significantly larger footprint.
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