The Enforcement Directorate’s Mumbai Zonal Office-I executed searches at 29 locations on October 16, seizing documents and freezing assets worth roughly ₹200 crore. The operation targeted the alleged manipulation of share prices for R M Drip and Sprinklers Systems Ltd and R&B Denims Ltd. The ED’s investigation centers on a coordinated effort where more than 3.5 crore shares and convertible warrants were issued to a closed circle of individuals and entities between April 2023 and March 2024. These allotments were funded by a small network of connected lenders and firms, creating a concentrated ownership structure that allowed for precise control over market supply.
The mechanism was deceptively simple. From late December 2025 to February 2026, WhatsApp groups—operating under names like “Multibagger Stocks” and run from Bhavnagar, Gujarat—circulated daily buy recommendations to retail investors. The ED noted that these groups used SIM cards registered in other people’s names in Haryana and Mumbai to obscure their origins. This promotional blitz, amplified via SMS and X, drove a sharp spike in trading volumes and share prices. As buying interest peaked, the preferential allottees—identified in clusters including Affluence Gems, Kawa HUF, and Komalay Consultancy—offloaded their holdings to unsuspecting retail buyers who had entered at higher valuations.
Zerodha co-founder Nithin Kamath highlighted the severity of the scheme on October 20, warning that social media tips remain a primary vector for retail losses. “It's crazy that even in 2026, people still fall for stock tips on WhatsApp,” Kamath wrote on X, adding that such tactics are the “silliest way to lose money.” He noted that as the market cycle matures, pump-and-dump schemes through influencers and messaging groups are likely to proliferate. The ED’s search of stockbroking and finance firm offices suggests the investigation may expand to examine how these trades were executed and whether intermediaries facilitated the manipulation.
The case underscores the risks of preferential allotments in small-cap stocks, where a narrow base of shareholders can exert disproportionate influence. While the ED has seized digital devices and documents, the investigation remains ongoing. For investors, the immediate takeaway is clear: verify the source of any unsolicited investment tip and be wary of stocks with sudden, unexplained spikes in volume driven by social media chatter rather than fundamental performance.