Money Laundering Probe by SEBI

Moryo Industries and 90 other connected entities including the company’s promoters and directors were barred by SEBI from dealing in securities on the count of Money Laundering.The matter is related to preferential allotment of 63.50 lakh shares of Moryo to 42 persons in November 2012.

The case is being referred to Enforcement Directorate, Financial Intelligence Unit and Income Tax Department for necessary action on their part, while Sebi will further probe the case with regard to violations in the capital markets.

SEBI Order on Moryo Laundering

Preliminary probe by Securities and Exchange Board of India (Sebi) found that certain entities connected to Moryo had substantially traded amongst themselves in shares of the company and created artificial volume price rise in the scrip. These entities have been referred by Sebi as ‘Moryo Group’.

The preferential allottees acting in concert with Moryo Group had misused the stock exchange system “to generate fictitious Long Term Capital Gains so as to convert their unaccounted income into legitimate income with no payment of taxes”. Long Term Capital Gains are tax exempted.

Besides, 42 preferential allottees and 42 Moryo Group entities have also been barred from dealing in the markets.

Sebi had initiated a probe into the dealings in shares of BSE-listed Moryo Industries for the period from January 15, 2013, to August 31, 2014.

It had observed that the shares allotted on November 9, 2012, by the company on preferential basis were not tradeable till November 8, 2013.

Further, it was observed that Moryo was able to raise Rs 15.87 crore through the preferential issues despite having a “poor and meagre fundamentals”.

Sebi found that the price and volume in Moryo’s scrip rose prior to the expiry of the lock-in period on the shares held by the allottees and had also substantially increased after the expiry of the lock-in period.

It was observed that some of the allottees had bank transactions with Moryo Group on more than one occasion.

Some of the allottees had transferred funds to the entities of Moryo Group, who had in turn transferred them to trading members, on most of the occasions, the order said.

“These facts clearly establish that Moryo Group entities …were connected to allottees and the funds from the allottees were used by the entities of Moryo Group for capital market activities,” Sebi said.

Among others, it was also found that Moryo Group had provided a hugely profitable exit to the allottees.
This could be only possible if the allottees, Moryo Group entities and Moryo and its promoter/ directors were hand in glove with each other.