Sebi lets off Cyberspace broker with warning

In a move that baffled investors and experts, the Securities and Exchange Board of India (Sebi) has let off the broker involved in the riggi...

In a move that baffled investors and experts, the Securities and Exchange Board of India (Sebi) has let off the broker involved in the rigging of Cyberspace shares with a warning.

Sebi has warned Prabodh Artha Sanchay Pvt Ltd to be careful in future with respect to its trading in the stock market. The broking firm was left off the hook despite the Sebi investigation finding its involvement in the Cyberspace affair.

‘Sebi’s investigation into the dealings in the shares of Cyberspace Ltd found that it was acting in concert with Arvind Johari, owner of Cyberspace Ltd,’ Sebi said.

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The Sebi investigations revealed that Prabodh Artha Sanchay supported the price of Cybersace and created an unofficial market. But strangely, Sebi in its order directed Prabodh Arth Sanchay ‘to be more careful in future’.

It may be recalled that even before the UTI-Cyberspace scam surfaced, Cyberspace promoted by Arvind Johari was in the news for the price rigging exercise and duping investors. Cyberspace was earlier a finance company which he converted into an infotech company to take advantage of the boom in 2000.

He rigged the Cyberspace share from around Rs 15 to over Rs 1,350 in less than six months. He ran a brokerage firm called Century Consultants through which he created a network of front companies that were used to ramp up his stock prices.

In the UTI case, Johari is accused of conspiracy to defraud the UTI of Rs 32.08 crore in the private placement of 3.45 lakh shares of Cyberspace Infosys. The conspiracy is alleged due to the questionable decision of the UTI top brass to enter into the private placement by buying Cyberspace shares at Rs 930 per share despite the adverse recommendation of the Trust’s own equity research cell. The scrip later fell to around just a rupee.

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Former UTI chairman P. S. Subramanyam and two former executive directors M. M. Kapur and S. K. Basu had earlier decided against investing in Cyberspace but they changed their decision inexplicably after four days. Stock broker Rakesh Mehta, acting at the behest of Johari, allegedly influenced the UTI top brass to invest in Cyberspace.

Johari apparently played on his Lucknow connections to get Atal Behari Vajpayee to inaugurate Cybertron Technopolis, a 40,000 sq ft technology park in the PM’s constituency in January last year. Moreover, he flashed his photograph with the Prime Minister around and used to impress people about his powerful connections.

In fact, even when the Bombay Stock Exchange began to investigate Cyberspace’s unusual price movements in 2001, a divisional chief from the Sebi had allegedly called the bourse and warned officials about Johari’s ‘connections’.