Jane Street, the embattled U.S.-based high-frequency trading firm, has purportedly told its employees that its practices, which culminated in its ban by the Securities and Exchange Board of India (Sebi), were “basic index arbitrage trading”, and it will challenge the ban placed by India’s capital markets regulator, news agency Reuters reported on Tuesday, citing an internal email.

The trading firm stated in an email sent to employees over the weekend that it was “beyond disappointed” by what it termed “extremely inflammatory accusations” from Sebi and is working on a formal response. However, the email did not specify the nature of the recourse the firm might take.

On Thursday, Sebi issued an interim order barring the U.S.-based investment firm and its group entities from accessing the securities market in India, while directing them to disgorge ₹4,843.57 crore in alleged unlawful gains. 

“The total amount of unlawful gains earned by the JS Group from the alleged violations, i.e., ₹4,843,57,70,168, shall be impounded, jointly and severally. Entities are directed to open an escrow account in a scheduled commercial bank in India to deposit jointly and severally the aforesaid amount of unlawful gains,” Sebi’s 105-page interim order stated.

The Jane Street Group entities operating in India—JSI Investments, JSI2 Investments, Jane Street Singapore, and Jane Street Asia Trading—allegedly manipulated Bank Nifty, the 12-stock banking index, and benefitted in unlawful gains worth ₹4,843.6 crore. These companies have also been barred from accessing the securities market and buying, selling, or otherwise dealing in securities, as per Sebi.

“JS Group first aggressively bought significant quantities of BANKNIFTY underlying constituent stocks and futures, temporarily pushing up or lending considerable support to the BANKNIFTY index. In the second patch of the day, as has again been demonstrated by data and analysis, JS Group was seen to practically and effectively reverse all of this buying activity from the first patch, by aggressively selling large quantities of BANKNIFTY underlying constituent stocks and futures,” the Sebi order by G. Ananth Narayan, Whole Time Member, stated.

Following the revelation of the extent of manipulation that Sebi accused Jane Street of, Tuhin Kanta Pandey, the chairman of the capital markets regulator, stated that the regulator is intensifying its surveillance to analyse manipulation in derivatives trading thoroughly. “There may not be many more such cases,” Pandey told Reuters, without divulging too many details. His comments bear significance as the country boasts the world’s largest derivatives market.