The Karjat Raid amd SEBI’s Blind Spots in Stock Mkt Governance
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For SEBI to evolve from a watchman of optics into a true guardian of market integrity, it must take risks and challenge powerful interests
By P SESH KUMAR
NEW DELHI, August 22, 2025 — When SEBI’s enforcement officers stormed Avadhut Sathe’s Karjat Trading Academy in the middle of a lashing monsoon, it looked like the regulator had finally sunk its teeth into India’s burgeoning “finfluencer” culture. The images were dramatic: laptops seized, classes disrupted, a YouTube market guru humbled. But beyond the optics, this raid raises a troubling question: is SEBI merely flexing its muscles on soft targets, while the deeper risks in India’s financial markets—algorithmic cartels, corporate governance black holes, IPO excesses, and offshore fund games—remain largely unpoliced?
The Thunder in Karjat
It could have been the set of a thriller. Rain lashed down in sheets as SEBI’s team navigated the countryside roads to Karjat. Inside Avadhut Sathe’s sprawling academy, marketed as a hub for “financial literacy,” students huddled around terminals, watching live market screens. When the regulators walked in with court orders and seizure warrants, the drama played out like an anti-climax to Sathe’s online persona—a man who had taught thousands to “conquer the markets” was now himself under regulatory siege.
The raid was no casual visit. Complaints had poured in for months that trading academies were masquerading as educators while engaging in coordinated stock pumping, especially of penny scrips. The method was simple: use classroom lectures to spotlight obscure stocks, often in collusion with operators who bought in advance, watch the students follow the “guru’s example,” and exit quietly while the price spiked. Those who came late to the party—ordinary retail investors—were left holding the wreckage.
SEBI had already drawn red lines earlier: finfluencers could no longer share live screens of trades in class; they were asked to use examples at least three months old.
Still, Sathe and others allegedly pushed the boundaries, blending pedagogy with profit. For SEBI, this was the perfect case to showcase vigilance. Kamlesh Chandra Varshney, SEBI’s Whole-Time Member, made the regulatory intent crystal clear: “If you misguide youth under the guise of education, promising returns without registration, you are squarely in violation.”
The symbolism was unmistakable. In a country where retail trading has exploded—over 12 crore demat accounts now exist, with first-time traders from Tier-II and Tier-III towns flooding into the market—the message was: beware of online gurus peddling shortcuts to wealth. The Karjat raid was meant to protect this new army of small investors.
The Problem with Low-Hanging Fruit
And yet, the Karjat raid was also the easiest target SEBI could have chosen. Finfluencers, for all their charisma and Instagram gloss, are minnows in the financial ocean. They lack political protection, they thrive on publicity (which backfires when the publicity is negative), and their regulatory breach—offering tips without registration—is relatively straightforward to prove.
Contrast this with the darker corners of the market. Algorithmic traders use millisecond advantages to skim profits in ways SEBI can barely track. Shell companies, often nested within corporate groups, launder money through round-tripping. Related-party transactions and creative accounting in promoter-driven companies quietly siphon shareholder wealth. Unicorns go public at eye-watering valuations, only to halve in price within months, eroding investor trust in the IPO process. And offshore flows—through Mauritius, Singapore, or Cayman Islands—wash billions of dollars into and out of India’s markets, sometimes masking dubious origins.
These are not easy targets. They require forensic data capabilities, cross-border cooperation, and—perhaps most daunting—political courage to take on India’s most powerful corporates. A raid in Karjat makes for good optics. A probe into a promoter group close to political power could rock the system itself.
The Beasts SEBI Has Yet to Tame
- Algorithmic Manipulation and Dark Pools
The future of trading is coded, not shouted in classrooms. High-frequency traders execute thousands of trades in milliseconds, exploiting patterns invisible to the naked eye. In the US, regulators like the SEC and CFTC have invested in “consolidated audit trails” to track such activity. India lacks comparable infrastructure. Without it, SEBI cannot easily prove manipulative intent even when distortions occur.
Dark pools—private trading venues away from the exchanges—compound the opacity. While India has fewer such platforms than Wall Street, the risk is rising as global players dip into domestic markets. The Karjat raid may protect a few retail investors, but without oversight of algos and dark pools, systemic risks could blindside everyone.
- Corporate Governance Black Holes
Consider the saga of Satyam in 2009 or the IL&FS collapse a decade later. These weren’t YouTube scams; they were full-blown governance failures that destroyed billions in investor wealth. Even today, related-party transactions, promoter pledging of shares, and accounting sleights remain common. SEBI’s enforcement here is sporadic—warnings, consent settlements, the occasional fine—but rarely the kind of sustained, systemic clean-up needed.
- IPO Frenzy and Unicorn Mispricing
Zomato, Paytm, Nykaa—the poster children of India’s “new economy” IPO wave—debuted with huge hype, only to see their valuations crash post-listing. Was it irrational exuberance or deliberate mispricing? Either way, retail investors bore the brunt. SEBI’s IPO disclosure norms focus on historic data, not the speculative assumptions driving valuations. By contrast, the UK’s FCA and the US SEC have begun to demand clearer forward-looking disclosures and risk warnings.
- Offshore Funds and Round-Tripping
When the Hindenburg-Adani saga erupted, one of the sharpest questions raised was about opaque offshore funds channelling billions into Indian markets without clear ownership trails. SEBI’s delayed response—scrambling to identify “beneficial owners” long after the controversy exploded—showed how ill-equipped it was to pierce the veil of Mauritius or Cayman structures. This opacity is not just a market risk; it is a national security risk.
- ESG Greenwashing and Ratings Capture
Every company today flaunts ESG credentials. Yet, who verifies if a cement giant really cuts emissions, or if a textile exporter genuinely avoids child labour? Ratings agencies, many of them paid by the very firms they certify, have conflicts built into their DNA. SEBI has moved to regulate ESG ratings, but progress is slow. Meanwhile, investors are lulled by glossy sustainability reports that may conceal more than they reveal.
Why SEBI Picks the Easy Targets
Why does SEBI go after finfluencers while leaving algos, corporates, and offshore funds relatively under-policed? The answer lies in a mix of capacity, politics, and optics.
Finfluencers are capacity-light cases—easy to investigate, simple to prosecute, and headline-friendly. A Karjat raid looks like decisive action. By contrast, a full-scale probe into a corporate giant or a global fund could drag on for years, involve cross-border battles, and unleash political lobbying that tests the regulator’s independence.
But there is also an element of political economy. Retail investor protection is visible and vote-friendly. Cracking down on promoters, auditors, or investment banks risks rattling markets, upsetting corporate allies, and denting “India growth” narratives. Symbolic enforcement is safe; systemic enforcement is risky.
SEBI: From Watchman to Guardian
If SEBI wants to be remembered as more than a policeman raiding finfluencers, it must confront the beasts it has long tiptoed around. That means: Investing in data infrastructure to monitor algorithmic trades in real time; Mandating stronger disclosures in IPOs, including forward-looking valuation assumptions; Aggressively pursuing related-party transactions and promoter misdeeds with criminal as well as civil penalties; coordinating with global regulators to track offshore fund flows and pierce beneficial ownership veils; and Building an independent ESG verification ecosystem, reducing reliance on conflicted ratings firms.
Above all, it requires courage—the courage to take on not just small-town gurus, but the biggest elephants in India’s financial jungle.
The Karjat raid was thunderous, dramatic, and in many ways justified. It showed SEBI’s willingness to act against a growing menace of finfluencers preying on naïve retail investors. But if the story ends there, it will be remembered as regulatory theatre—low-hanging fruit plucked for headlines while the deeper rot of market manipulation, governance failures, IPO froth, and offshore opacity remains untouched.
For SEBI to transform from a watchman of optics to a true guardian of market integrity, it must wade into rougher waters. That means taking risks, upsetting powerful players, and expanding its own capacity. The storm in Karjat can either be the start of a new regulatory monsoon—or just another passing shower on India’s vast and restless financial landscape.
(This is an opinion piece, and views expressed are those of the author only)
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