Latest news with #AbhirajArora
Mint
2 days ago
- Business
- Mint
Jane Street deposits ₹4,843 cr ‘unlawful gains'. But its path back to trading is not easy
Jane Street has met a key requirement to resume operations in Indian markets by depositing over ₹4,843 crore to comply with the regulator's interim order against alleged market manipulation. Yet, the firm's immediate return to trading isn't certain amid multiple regulatory hurdles and unprecedented scrutiny. The quantitative trading firm has fulfilled the primary condition outlined in paragraph 62.1 of the Securities and Exchange Board of India's (Sebi's) interim order, directing it to deposit 'unlawful gains" from alleged index manipulation in an escrow account with a lien marked in Sebi's favour. 'As per the order's own terms, specifically clause 62.11, this action should pave the way for the temporary ban on their market access to be lifted," said Abhiraj Arora, partner at Saraf & Partners. However, he cautioned, 'The investigation is still ongoing, and Sebi has put specific, forward-looking restrictions in place." Read more: Jane Street hires Khaitan in index manipulation case Jane Street will continue to contest the regulator's order, according to a person familiar with the matter. Jane Street and Sebi did not respond to Mint's emailed queries till press time. Clause 62.11 explicitly states that the directions stipulated in the interim order under paragraphs 62.2 to 62.10, which include the ban on trading, shall 'cease to apply upon compliance with directions in clause 62.1". This means that once the escrow deposit is verified, the trading ban imposed restraining Jane Street Group from accessing the securities market should automatically be lifted. 'Typically, the exchanges make a press release informing about the compliance of the Sebi directions with regard to the deposit of unlawful gains, and subsequently, the ban is lifted," said Akshaya Bhansali, partner at Mindspright Legal. 'The whole process is completed in a day so that the entity does not suffer from its continuing ban post-compliance." Citing the interim order, Asish Philip, partner at LKS law firm, 'on payment of deposit, all other restrictions will be waived". Jane Street 'requested for relaxation of conditions and Sebi is examining the same", he said. However, Rohit Jain, managing partner at Singhania & Co., said, 'Lifting of the trading restrictions was automatic but not instantaneous. Sebi must first verify and confirm the compliance." The regulator certifies this compliance and communicates it to stock exchanges and intermediaries, who then restore market access for Jane Street, according to Jain. 'There is no fixed timeline prescribed, but this process typically takes a few days to weeks, depending on administrative and verification procedures." Read more: Jane Street's troubles may have only just begun. Sebi is now checking Sensex options. Moreover, according to Jain, the deposit only serves as a safeguard so the suspected funds don't leave the Indian jurisdiction or get dissipated while the investigation continues. Scrutiny persists The quant firm will continue to be under scrutiny. The Sebi order includes clause 62.13, which directs stock exchanges to monitor future dealings and positions of JS Group on an ongoing basis to ensure that these entities do not directly or indirectly indulge in manipulative activity. Such directions 'are one of a kind and not a general practice by Sebi", calling it a departure from standard regulatory protocol, according to Bhansali. Arora said the specific instruction to the stock exchanges to 'closely monitor" Jane Street is a 'heightened supervisory measure. This isn't just business-as-usual monitoring; it's a clear signal that the regulator remains deeply concerned and has put the entity on a short leash." Since it was an interim measure and not a final verdict, the order preserves Sebi's right to continue its investigation and take further action, he said. Special treatment Bhansali said Sebi appears to be giving special treatment to the matter. Trading restrictions and de-freezing of the bank accounts, in compliance with Sebi's own interim order, would have been listed automatically once Jane Street complied with the deposit of the 'unlawful gain", she said. 'However, the Sebi press release states that the request of Jane Street to lift the restrictions is under examination. This is not in line with the direction in the ex-parte ad-interim order," Bhansali said. 'Any delay in lifting the restrictions by Sebi will give an upper hand to Jane Street and will make it difficult for Sebi to answer before the Securities Appellate Tribunal." Read more: Andy Mukherjee: Jane Street's secret sauce for Indian markets should be tested out
Mint
25-04-2025
- Business
- Mint
How Sebi uncovered front-running in Madhav Stock Vision case
In a 127-page interim order that could set a new benchmark for market surveillance, the Securities and Exchange Board of India (Sebi) has charged Mumbai-based broker Madhav Stock Vision Pvt. Ltd (MSVPL) and five individuals for front-running the trades of a large institutional investor, referred to as the 'Big Client." Sebi restrained Madhav Stock from dealing in securities in its account and prohibited the individuals from dealing with securities, directly or indirectly, until further orders. What sets this order apart is the holistic integration of technological evidence to reconstruct the modus operandi of the accused in real time, experts say. Read more: Sebi's big move: Common contract note launch set for 30 April, but market players express concerns The order of April 23 marks a pivotal shift in Sebi's enforcement strategy—one that blends IP log analysis, telecom data, and chat forensics to trace real-time information leaks and manipulation. "Sebi has effectively uncovered real-time information leakage and front running," Abhiraj Arora, partner at Saraf and Partners, said. 'This approach enhances the regulator's ability to detect and prove complex financial crimes with concrete digital evidence, marking a significant advancement in enforcement practices." At the heart of the case is an unusual operational detail: four different brokerages, all empanelled with the Big Client, operated from the same commercial complex—Kemp Plaza in Malad, Mumbai. This proximity allegedly allowed two key individuals—Jyotiswaroop Purohit and Pankit Jhaveri, both affiliated with Broker no.1—to eavesdrop on phone calls made by dealers of other brokers to the Big Client. These details were then allegedly passed to Rajesh Jhaveri and Ajay Jain, dealer and director of MSVPL, who placed their trades ahead of the Big Client's, profiting from predictable price movements. Most calls between these individuals occurred during market hours, suggesting a high level of coordination. "Taking advantage of this proximity, Purohit and Pankit Jhaveri passed on the non-public information pertaining to the impending order of the Big Client to the dealer/director of Madhav Stocks," the order by Whole Time Member Kamlesh Varshney noted. Profits from the trades were reportedly routed through relatives falsely shown as employees of MSVPL and paid under the guise of salaries. Bank records corroborated this flow of funds. Sebi's investigation relied heavily on technological tracing. Using IP logs and internet service provider data from Airtel, the regulator tracked the locations from which the trades were placed. All roads led back to G-1 Kemp Plaza—used by multiple brokers and MSVPL. Read more: Brokers seek time to prepare for same day settlement Investigation showed that orders were placed through NSE and BSE Technology terminals at the same address. Chat transcripts and phone call recordings showed real-time reactions to emails from the Big Client, with accused individuals adjusting their trades within seconds of receiving or overhearing information. One intercepted conversation detailed plans to plant a mobile phone in a pocket to listen in on trading cabins. In another, instructions from the Big Client were relayed within seconds and acted upon instantly. 'Legally, this sets a precedent," said Kunal Sharma, partner at Singhania & Co. 'When circumstantial digital evidence is corroborated across platforms—IP logs, call data, chats— to establish intent and participation in market abuse under Sebi regulations." Sebi's investigation team also conducted raids at 11 premises, including the residences and offices of three accused. Laptops, mobile phones, and routers were seized, and digital images were preserved. Statements were recorded to corroborate digital findings. The case raises serious questions about inter-broker operational setups and how shared infrastructure can create vulnerabilities in confidential order handling. 'Companies may now need to evaluate not only digital safeguards but also the physical security of shared spaces," said Zubin Morris, partner at Little & Co. 'Restricting the use of unauthorized communication tools and ensuring that confidential information is protected from unauthorized access." It also calls attention to the role of institutional clients who rely on multiple brokers for execution. Experts say clients must revisit their engagement models and adopt stricter communication protocols. 'Institutional clients would be wise to re-look at their present arrangements with empanelled brokers to ensure that adequate measures are already in place and are being enforced effectively to hedge themselves against any misuse of their trading information", Tomu Francis, partner at Khaitan & Co., said. Read more: Experts flag gaps in Sebi's speedy dispute resolution plan Francis added that the regulator may be moving to a principle-based approach, requiring market participants such as stock brokers, mutual funds, PMS, etc., to implement surveillance and fraud detection mechanisms to root out any suspicious activity. "Such preventative measures, while might be burdensome so far as cost of compliance is concerned, is a better alternative to post-facto enforcement action, which while acting as a deterrent, falters so far as investor protection is concerned since the damage is already done," he said. The case could become a reference point for enforcement based on circumstantial digital evidence, provided the chain of custody and authenticity are maintained. 'Courts may increasingly recognize such evidence as admissible provided chain of custody and authenticity standards are strictly maintained," said Sharma, adding that the order demonstrated Sebi's decisive move toward aligning its enforcement framework with global regulators from the US and UK. The regulator's move may also trigger changes in corporate governance expectations. Directors may be held more accountable if they facilitate or fail to stop fraud. "Holding directors accountable for their companies' actions, especially if they facilitated or ignored fraudulent activities, sets a stronger precedent for piercing the corporate veil in market abuse cases," Arora said. Meanwhile, Morris believed this trend could result in more stringent expectations for corporate leadership with a possible cultural shift within the corporate sector, where directors take a more hands-on approach to compliance and risk management. He also anticipated a "shift towards brokers who can guarantee stronger safeguards for sensitive information" and likely increased emphasis on "contractually binding confidentiality agreements". "In short, this case could prompt a broader industry shift towards more robust controls over sensitive trading data", Morris said. Read more: Angel One's March quarter hit by new Sebi curbs on F&O trading Sebi has issued show cause notices to all the accused, asking why suitable directions should not be issued against them for the alleged violations. It has also asked for a fee of over ₹ 2.72 crore, the alleged illegal gains, to be impounded in a fixed deposit jointly and severally amongst the accused within 15 days.
