Four individuals and five organisations made a profit of Tk 4.77 billion by manipulating the shares of Beximco Group. They artificially increased the price through manipulation, sold the shares, and took out the profit.
In addition to this, the amount of unrealised profit (unrealised gain) for these individuals and organisations from the same shares was Tk 15.12 billion. This manipulation occurred in 2021 and 2022.
The capital market regulator, the Bangladesh Securities and Exchange Commission (BSEC), has fined the four individuals and five organisations more than Tk 4.28 billion, as they gained Tk 4.77 billion in profit through manipulation.
This is the highest amount of fine ever imposed for the manipulation of a single company in the stock market.
The penalty was decided at the BSEC commission meeting held on Tuesday. After the meeting, the decision was announced in a press release by the BSEC.
Marzana Rahman, Mushfiqur Rahman, Momtazur Rahman, and Abdur Rauf have been fined, along with five companies: Tradenext International, Jupiter Business Limited, Apollo Trading, ART International, and Crescent Limited.
The fines are as follows: Tk 1.25 billion for Mushfiqur Rahman, Tk 730 million for Crescent Limited, Tk 700 million for ART International, Tk 580 million for Momtazur Rahman, Tk 310 million for Abdur Rauf, Tk 300 million for Marzana Rahman, Tk 22.5 million for Jupiter Business, Tk 150 million for Apollo Trading, and Tk 40 million for Tradenext International.
Manipulation of shares in the stock market is often carried out through various brokerage houses and merchant banks. After speaking with several top executives of those brokerage houses and merchant banks, it was revealed that the individuals and institutions involved in this manipulation were beneficiaries of the Beximco Group. Essentially, a senior official handling Beximco Group's shares used the names of these individuals and companies to execute the transactions.
A top official from one of the relevant brokerage houses told Prothom Alo that out of the nine individuals and institutions mentioned, one person and one institution had a BO (Beneficiary Owners) account at his brokerage. However, these individuals and company officials never personally traded using their BO accounts. Instead, at various times, representatives from Beximco Group would visit the brokerage house and conduct the trades using these BO accounts. In fact, some BO accounts were even opened at the Beximco office.
The Dhaka Stock Exchange (DSE) conducted an investigation into the manipulation involving Beximco shares. The investigation report was subsequently submitted to the capital market regulator, the Bangladesh Securities and Exchange Commission (BSEC). After reviewing the allegations in the report and the relevant legal violations, the BSEC summoned the accused for a hearing.
According to BSEC sources, the individuals and institutions accused of manipulation were contacted for the hearing using the addresses listed in their BO (Beneficiary Owners) accounts. However, the accused individuals and top officials of the involved organisations did not attend the hearing. Instead, young executives represented them at the BSEC hearing, submitting written statements on their behalf.
Upon further investigation, it was revealed that most of the individuals and organisations facing fines for manipulation had used addresses in the Shantibagh area of the capital. The name of Janata Capital and Investment, a subsidiary of Janata Bank, has been used in the manipulation of shares for these individuals and institutions.
Beximco Group is the largest customer of Janata Bank, and Salman F Rahman, a prominent figure, had considerable influence over Janata Bank during most of the 15-year rule of the previous Awami League government.
He exercised control over appointments to top positions in the bank, including the chairman, directors, and managing director. Additionally, significant trading of Salman F Rahman and Beximco Group’s shares was conducted in the stock market through Janata Capital.
Sources indicated that Salman F Rahman repeatedly secured large loans from Janata Bank by artificially inflating the price of shares in the stock market.
According to insiders, the institutions and individuals fined for the manipulation were primarily used as pawns in the Beximco share manipulation scheme.
A source connected to both the DSE and BSEC revealed that the fined individuals and institutions are essentially anonymous entities linked to Beximco. Due to this anonymity, the true identities of these individuals and organisations remain uncertain. Consequently, the DSE source has expressed doubt about whether these individuals even exist. Officials at the BSEC are concerned that it may be challenging to collect the fines if the real identities of those involved in the manipulation cannot be verified.
Stock market analysts suggest that to identify the real beneficiaries of the manipulation of Beximco’s shares, the bank account information must be thoroughly verified.
According to DSE and BSEC sources, the first major manipulation of Beximco shares occurred between 28 July and 6 September 2021. During this period, the company's share price in the market rose from Tk 90 to Tk 120, a more than 33 per cent increase in just one and a half months. During this time, the nine individuals and organisations involved sold shares and profited more than Tk 1.57 billion, while the amount of unrealised gains stood at Tk 9.85 billion.
In the second phase of manipulation, between 2 January and 10 March, 2022, Beximco's shares saw an increase of Tk 4 (about 2.5 per cent). The same nine individuals and organisations sold their shares, making a profit of around Tk 3.2 billion, with the unrealised gains exceeding Tk 5.26 billion.
It is known that in August 2022, DSE submitted its investigation report on the manipulation of Beximco's shares to the BSEC.
However, the previous commission, led by Shibli Rubaiyat ul Islam, kept the file under wraps without taking any action.
Following a change in government after a student-people mass uprising on 5 August, the BSEC was reorganised under the leadership of Rashid Maqsood, a former banker. The reconstituted BSEC has now begun addressing these incidents.
Capital market participants say that nearly 90 per cent of the profits earned by those involved in the manipulation have been penalised. The imposition of such a substantial fine is seen as a strong message to the market. They believe that if exemplary punishment is provided in cases of manipulation, such incidents will decrease in the future.
When asked, former BSEC chairman Farooq Ahmed Siddiqui told Prothom Alo that it is crucial to identify the real beneficiaries of the manipulation before imposing large fines. This can be properly executed by consulting the brokerage houses and merchant banks through which the transactions were made, as well as verifying bank account information. If the penalty is imposed after such verification, it is more likely to be recovered. However, if fines are issued solely on the basis of manipulation using BO accounts, without accurately identifying the individuals involved, the chances of recovery are slim. Therefore, it is essential to identify the real people behind the manipulation to ensure successful fine collection.