“All my lifetime's savings are gone.

I
don't know how to feed my family."
- A small investor hit by the Ketan

Parekh scam, in April 2001. ”

1
 KETAN PAREKH AND 2001
SCAM

2
 REPUBLIC OF SCAMS
INDIAN ECONOMY THROUGH THE
SCAMS
WHY STOCK MARKET ATTRACTS

CONDITIONS PRIOR TO K-10 SCAM

WHO WAS KETAN PAREKH AND HIS

K10 STOCKS

KETAN PAREKH’S MODUS OPERANDI

CONTENTS
THE SCAM STORY

SEBI SLEPT AS STOCK MARKET BLED

WHAT WAS NOT DONE WHAT SHOULD

HAVE BEEN DONE

LESSONS FOR YOU AND ME

3 THE BEGINNING
 REPUBLIC OF SCAMS

4
 REPUBLIC OF SCAMS

TOTAL SCAM MONEY(APPROX)

SINCE1992:
Rs73000000000000 Cr (73 Lakh Cr)

5
 REPUBLIC OF SCAMS
Ramlinga Raju , Founder,
Satyam Computers.
Amount : Rs.8,000 Crs
The fraud: Cooked up
account books of his
company.
Method: Inflated revenues
and hid liabilities.

6
 REPUBLIC OF SCAMS
Harshad Mehta,Broker.
Amount : Rs.4,000Cr
The fraud:
Responsible for the
securities scam of
1992.
Method: Accused of
diverting funds from
banks to stock brokers
7
 REPUBLIC OF SCAMS
Dinesh Dalmia former
MD, DSQ Software.
Amount : Rs.595 Cr
The fraud: Dalmia resorted
to illegal ways of making
money through the
shares of DSQ software.

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 REPUBLIC OF SCAMS
KETAN PAREKH - 1500 Cr(AGGREGATE BORROWINGS)

C R BHANSALI - 1200 Cr

ABDUL KARIM TELGI - 171.33 Cr

VIRENDRA RASTOGI - 43 Cr

UDAY GOYAL- 210 Cr

THE UTI SCAM – 32 Cr

SANJAY AGARWAL – 92 Cr
9
 INDIAN ECONOMY THROUGH THE SCAM

PANIC RUN ON THE BOURSES

SENSEX LOST 700 POINTS

TOTAL WEALTH OF APPROX $32B WAS WIPED OUT IN MARKET

CAPITALIZATION

SHOCK WAVES FELT IN CALCUTTA & OTHER FINANCIAL CENTRES

10
INDIAN ECONOMY THROUGH THE SCAMS

BANK OF INDIA,SBI,PNB SUFFERED HUGE LOSSES

TOTAL BANKING LOSS OF 12000 MILLIONS ACCORDING TO RBI

HUNDREDS OF INVESTORS ON THE BRINK OF BANKRUPTCY

NEXUS OF BIG INSTITUTIONAL INVESTORS-BUSINESSMAN-

BANKER-OFFICIAL-POLITICIAN MANIPULATED
FINANCIAL MARKETS

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 WHY STOCK MARKETS
ATTRACT US

12
 WHY STOCK MARKET ATTRACTS

VICIOUS CYCLE OF GREED AND FEAR DRIVES HUMANS

OPENING OF INDIAN ECONOMY

LOW INTEREST RATES IN THE BANKING SYSTEM

IMMENSE LIQUIDITY IN HANDS OF NEO RICH

HISTORY OF SCIRPS GIVING HIGH RETURNS

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 WHY STOCK MARKET ATTRACTS

DESIRE TO MAKE QUICK AND EASY MONEY

IMMENSE MEDIA PROPAGANDA –GLORIFYING STOCK MARKET

RISE OF FLY BY NIGHT BROKERS AND FINANCIAL COMPANIES

UNAWARENESS ABOUT THE INHERENT RISKS

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 CONDITIONS PRIOR TO SCAM

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 CONDITIONS PRIOR TO K-10 SCAM

LOOPHOLES IN REGULATORY MECHANISM

SEBI-WITHOUT TEETH

RBI-NO PRUDENT NORMS OR SUPERVISION

KETAN PAREKHS ASTUTE UNDERSTANDING OF MARKETS

GREED ON ALL FRONTS-PERSONAL AND COLLECTIVE

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 CONDITIONS PRIOR TO K-10 SCAM

BELIEF OF “CAN GETAWAY WITH MURDER”

MANIPULATION POSSIBLE OF BANKING SYSTEM

EVERY ONE WANTING A PIECE OF CAKE IN SHARE MARKET

SUBSTANTIAL INCREASE IN DISPOSABLE INCOME

INCREASE IN GREED AND RISK TAKING CAPACITY

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 CONDITIONS PRIOR TO K-10 SCAM

PROTECTORS OF PUBLIC MONEY(BANKS)-BECOMING THE THIEVES

EVERY FINANCIAL INSTITUTION WAITING TO JUMP INTO STOCK MARKET

BELIEF IN KETAN PAREKH AS A MAGICIAN WITH SUPER NATURAL POWERS

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 KP -THE GREAT AND HIS K-10

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 THE PERSONALITY OF KP:THE BOMBAY BULL

A CHARTERED ACCOUNTANT BY PROFESSION

LEARNED STOCK MARKET WITH A FINANCE FIRM-MONEY CARE

MANAGED FAMILY BUSINESS–NH SECURITIES

STARTED DREAMING BIG WITH DOT COM BOOM

HE TESTED HIS SKILLS OF FINANCIAL ENGINEERING IN PENTAFOUR

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 THE PERSONALITY OF KP:THE BOMBAY BULL

RANBAXY WAS THE SECOND SPOTTED COMPANY

USED ONLINE TRADING TO ACHIEVE HIS GOALS

STARTED MANIPULATIONS BY BUYING STOCKS OF LITTLE KNOWN COMPANIES

DEVELOPED STRONG RELATIONS

BUILT A NETWORK OF COMPANIES FOR STOCK MARKET OPERATIONS

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K-10 STOCKS:THE KEY TO WEALTH OF KP

K-10 WERE THE STOCKS IN WHICH KP PLAYED

THEY WERE MOSTLY MEDIA STOCKS WITH LOW LIQUIDITY

MUTUAL FUNDS INVESTED HEAVILY IN K-10 STOCKS

K-10 STOCKS BECAME TALK OF THE TOWN

22
K-10 STOCKS:THE KEY TO WEALTH OF KP

K-10 REGULARLY FEATURED IN TOP TRADED STOCKS IN 2000

KP OPERATED THROUGH SMALLER EXCHANGES

KP TRADED IN THESE STOCKS IN FICTITIOUS NAMES

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K-10 STOCKS:THE KEY TO WEALTH OF KP
ABCL
MUKTA ARTS
TIPS

PRITISH NANDY COMMUNICATIONS

HFCL
GLOBAL TELEFILMS
ZEE TELEEFILMS
CREST COMMUNICATIONS

PENTA MEDIA

24 AFTEK
25
 THE MODUS OPERANDI OF KP

(1)KP buys shares Other Investors

Of select companies Also invest
In KP stocks

Banks and Prices are jacked

Retail Investors UP by Circular
Loose Trading
Bear Cartel
Sells the
Inflated stocks
Prices reduce

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 THE SCAM STORY

27
 THE SCAM STORY

KP GETS INTO STOCK MARKET TO MAKE IT BIG

STARTS INVESTING –SUCCESS FOLLOWS

KP THE PIED PIPER-PEOPLE START FOLLOWING HIS SELECTION

KP GETS ADVENTUROUS

ISSUES CHEQUES DRAWN ON BOI TO MMCB

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 THE SCAM STORY

MMCB ISSUES PAY ORDERS

PAY ORDERS ARE DISCOUNTED AT BOI

MMCB CROSSES ITS CAPITAL NORMS FOR INVESTING IN

CAPITAL MARKET

KP USES BOI ACCOUNT TO DISCOUNT 248 PAY ORDERS

TOTAL WORTH OF PAY ORDERS 24 BILLION

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 THE SCAM STORY

BOI EVENTUALLY LOSSES 1.2 BILLION

SECOND ROUTE KP USES IS HIS FAVORITE-MMCB

BORROWS 250 CRORES FROM GTB AND 1000 CRORES

FROM MMCB

RBI REGULATIONS THEN ALLOWED ONLY 15 CRORES

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 THE SCAM STORY

KP BUYS MORE STOCKS RISE AGAIN

HFCL RISES FROM RS 790TO 1353,VISUALSOFT 625 TO 8448

DEC 2000 NASDAQ FALLS AGAIN

KPS SWAN SONG –AS BEAR CARTEL TIGHTENS GRIP

KP IS DROWNED IN HIS OWN K-10

31
 THE SCAM STORY

KP FACE LIQUIDITY CRUNCH.CSE HAS PAYMENT ISSUES

STOCK VALUE OF KP STOCKS DECLINES FROM 12 TO 6-7 BILLION

SITUATION WORSENED –KPS BADLA PAYMENT DECLINED

CSE BROKERS DEFAULT

BY MID MARCH 2001 K-10 STOCKS VALUE IS 2.5-3 BILLION

KETAN PAREKH ARRESTED

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 SENSEX FELL 28% IN TWO
MONTHS

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 SOME K-10 STOCKS(Rs)
COMPANY 31 MARCH 01 31 DEC 2009

MUKTA 136.85 50

TIPS 61.80 48.20

GLOBAL TELESYSTEMS 161.50 381

ZEE TELE 121.60 250

PENTAMEDIA 89.20 3.88

AFTEK 30.65 16.85

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EVERY COIN HAS TWO SIDES-THE GOOD AFTERMATH

MANY GAPING LOOPHOLES IN THE MARKET WERE PLUGGED

BADLA WAS BANNED & OPERATORS COULD NOT CARRY FORWARD TRADE
IN ITS PRIMITIVE FORM

TRADING CYCLE WAS NOW REDUCED FROM ONE WEEK TO A DAY

FORWARD TRADING FORMALLY INTRODUCED IN FORM OF

EXCHANGE - TRADED DERIVATIVES

BROKER CONTROL OVER STOCK EXCHANGES WAS DEMOLISHED

PAREKH FORCED LETHARGIC POLICY-MAKERS TO INSTITUTE REFORMS

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 SLEEPING REGULATORS

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SEBI SLEPT AS STOCK MARKET BLED

NO CONTROL ON PRICE MANIPULATION

POOR RATE OF CONVICTION AND PENAL ACTION

NO DUE PROCESS OF REGULATION

BLIND EYE TOWARDS UNREALISTIC PRICE RISE OF SCRIPTS

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SEBI SLEPT AS STOCK MARKET BLED

NON-IMPLEMENTATION OF DISCLOSURE NORMS

REGULATORY BIAS

INDICATION OF EXTRANEOUS PRESSURES

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WHAT WAS NOT DONE WHAT SHOULD HAVE BEEN
DONE

REGULAR INSPECTION FROM RBI

EMPOWERING SEBI

STRENGTHENING NORMS AND REGULATION

COORDINATION OF CENTRAL BANK AND SEBI

39
WHAT WAS NOT DONE WHAT SHOULD HAVE BEEN
DONE

NEGLIGENCE OF SMALL COOPERATIVE BANK

ASSETS LIABILITY MANAGEMENT FOR BANK

INVESTIGATE UNUSUAL PRICE MOVEMENT OF SHARES

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 THE END GAME

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 WHO LOST WHO ALWAYS
LOSSES-THE COMMON MAN

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 HAS SOMETHING CHANGED

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 WELL-NOT REALLY

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 WHERE ARE WE HEADED-
LESSONS FOR ME AND YOU

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 LESSONS FOR YOU AND ME

STOCK MARKETS ARE SPECULATIVE TO SAY THE LEAST

BEGINNERS ARE BETTER OFF WITH MUTUAL FUNDS

DO NOT EXPECT MIRACULOUS RETURNS

TRACK THE COMPANY NOT THE SHARE

NEVER EVER INVEST WITH BORROWED CAPITAL

46
 LESSONS FOR YOU AND ME

DIVERSIFY

SET STOP LOSSES WHENEVER INVESTING IN STOCK MARKET

INVEST CAPITAL WHICH IS NOT IMMEDIATELY REQUIRED

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 THE BEGINNING OF ANOTHER
SCAM ?

48
 LAST HEARD KETAN PAREKH
IS ACTIVE IN STOCK MARKET
THROUGH MANY CONDUITS

THE PIED PIPER OF STOCK

MARKET WILL REMAIN
WORK IN PROGRESS FOR
INVESTIGATING AGENCIES
49
 THE SCAM CONTINUES

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