SEBI bars former Axis MF dealer Viresh Joshi, 20 others in ₹30.56 crore front-running case

The Securities and Exchange Board of India (SEBI) has barred 21 entities, including former Axis Mutual Fund chief ​ealer Viresh Joshi, from accessing the securities market after concluding that they were part of an elaborate front-running scheme that generated unlawful gains of ₹30.56 crore by exploiting confidential trading information of the fund house.

In its 146-page final order issued on Friday, the market regulator directed that the ₹30.56 crore already impounded pursuant to its interim order in February 2023 be treated as disgorged and transferred to the Investor Protection and Education Fund (IPEF). The noticees have also been directed to pay 12% annual interest on the unlawful gains from the end of the investigation period until the date of deposit.

SEBI reconstructs alleged front-running network

The order stems from an investigation into trades executed between September 2021 and March 2022, when SEBI alleged that Viresh Joshi, then chief dealer at Axis Mutual Fund, passed non-public information relating to impending fund trades to Prijesh Kurani, who allegedly executed front-running trades through multiple conduit or "mule" accounts. The regulator also held that Sumit Desai, Pranav Vora and Vaibhav Pandya facilitated the scheme by arranging trading accounts and introducing key participants.

According to SEBI, the front-running trades followed classic Buy-Buy-Sell (BBS) and Sell-Sell-Buy (SSB) patterns, enabling the network to profit before large institutional orders placed by Axis Mutual Fund moved stock prices.

WhatsApp chats, call records and Dubai links cited

A big chunk of the order relies on electronic evidence, including WhatsApp conversations, call detail records, Bloomberg chats, Apple FaceTime and BOTIM communications.

SEBI concluded that the WhatsApp contact saved as "Asdfg" in Prijesh Kurani's phone referred to Viresh Joshi and that references to "Jadugar" in the conversations pointed to him as well. The regulator said the evidence, including travel records and documents relating to Vintage Capital Investment LLC in Dubai, established a link between Joshi and the overseas entity.

The order also noted that approximately ₹11.62 crore was deposited into Vintage Capital's bank account in Dubai during the investigation period, with SEBI relying on information obtained from the UAE's Securities and Commodities Authority and WhatsApp chats discussing transfers of funds.

Facilitators equally liable, says regulator

Rejecting arguments that certain noticees merely arranged trading accounts and did not directly execute trades, SEBI held that facilitators formed an integral part of the fraudulent arrangement.

"Mr. Sumit, Mr. Pranav and Mr. Vaibhav acted in concert as part of a single front running arrangement," the order said, adding that their role in arranging mule accounts and facilitating communications could not be separated from the unlawful gains generated by the scheme.

The regulator also observed that disgorgement is "restitutionary in nature", while market-access restrictions serve a broader remedial purpose and are not merely punitive.

Three-year market ban

SEBI prohibited all 21 noticees from buying, selling or otherwise dealing in securities for three years, while allowing the period already undergone under the 2023 interim order to be set off against the final restraint. Open derivative positions, if any, may be squared off within three months or upon contract expiry.

The final order brings to a close one of SEBI's most closely watched front-running investigations involving a domestic mutual fund, with the regulator relying extensively on digital communications, trading patterns and financial trails to establish what it described as a coordinated scheme to exploit confidential institutional trading information.