Name: Prabhat Mehto

Enrollment no. - 40380003918

CASE STUDY: KETAN PLAYED AROUND WITH OTHERS’ MONEY

Q1. Explain in your own words how Ketan Parikh used other people’s money to play his
game of speculation.

Ketan Parekh is an institutional stock broker and a charted accountant also. He is a key person of
the scam which is done in 1998-2001. In a case of harshit mehta, he attracts the retail investors
while Ketan Parekh attracts the institutional investors like Mutual funds, hedge funds etc.

 Using pump and dump scheme

Ketan usually purchased a good amount of shares of a company and then flow a false
information in the market to attract the institutional investors. Due to this, the demand and
price of share will rise. Once the prices are high then he sells his all shares to the investors
on high prices and stop promoting that particular shares, this results in a sudden fall in the
value of shares and people suffer loss.

Institutional investors are more focused on liquidity, so that ketan started circular trading to show
the liquidity aspect of the security. He promotes the instant sell and purchase of shares between
his own companies to show the maximum no. of transactions to the investors. From this, investors
thinks that these shares are traded very frequently and thus, it is highly liquid and this factor also
attract investors to invest.
Name: Prabhat Mehto
Enrollment no. - 40380003918

Basically, ketan started manipulating 10 stocks and those are called K-10 stocks. His manipulation
is so strong because he was succeeded to upgrade share prices at a phenomenal rate, like Penta
software goes to 2700rs from 175rs and Global tele systems shares goes to 3100rs from 85rs.

He arranged money from his promoters and banks. The global trust bank and madhavpura
mercantile co-operation bank gave funds to ketan parekh. He gives his shares as collateral to the
global trust bank and raise funds and further he used that funds for investment in the market. More
than 100 crore of loan is given by GT Bank. He also joined hands with the officials of Madhavpura
bank and they helped him to raise funds against a payment order (also known as pay order) and
the amount was detected is around 800 cr. And later on ketan fails to pay bank that amount and
the money which was lended is the money of general public who keep their deposits with bank
and when people asked for their money then bank has no money to pay and it suffered a loss and
RBI cancelled the license of madhavpura bank in 2012.

So, how he use public money to play his game of speculation.

Q2. Discuss briefly Ketan Parikh’s modus operandi to ramp up shares of select companies.
What was the impact of the scam on the market?

I already mentioned about his method of manipulating share prices, it was the time of dot com
boom and the market of technology and telecom services are increasing so the rise in price of
shares by ketan seems like the share price are rigging due to real market demand but in reality it’s
all because of ketan parekh. Some of the selected companies are:-

a) Pentafour software
b) Global tele systems
c) HFCL
d) Zee

Impact

The impact of any fraud, manipulation and misinformation is negative in the market and same
happens in this scam also. Institutional investors trusted on market but they are unaware that it’s
Name: Prabhat Mehto
Enrollment no. - 40380003918

not a market which plays that role, its ketan who was doing all price rigging activity and he used
pump and dump scheme for this scam and this converted to huge losses not only to institutional
investors was harmed but the retail investors are also affected from this scam. Two banks are
involved and both faced a huge debt on them and one bank ended up to lose their license. The
depositors are also affected even without investing in the market. A special thanks to Sucheta dalal
who has a major role in exposing this exam otherwise it would be more distructing for the market.