Abul Khayer, associates fined again over unlawful trading in Crystal Insurance

Department of Cooperatives official Md Abul Khayer and his associates have been slammed with fines worth Tk 24.6 million once again for manipulating share price of a single stock--Crystal Insurance.

This is not the first time he has been found guilty of the offense. Mr Khayer and his family members have been fined several times over the past five years for involvement in stock price manipulations.

But every time fines were scanty relative to the profits he had made through corrupt means in the stock market and so the punishment could never deter him from repeating the illegal acts.

Mr Khayer and his associates realized gains worth Tk 23.66 million through transactions of shares of Crystal Insurance while their unrealized gains amounted to Tk 70.58 million, according to reports of the BSEC enforcement department.

Realised capital gains refer to the profit made after selling shares, while unrealised capital gains mean the shares already purchased are trading at higher prices in the market at present and are available for sale to make profits.

Mr Khayer, alias Hiru, was an influential investor in the market during the regime of former chairman of the Bangladesh Securities and Exchange Commission Prof Shibli Rubayat Ul Islam.

He was well-known as a key market manipulator then. Whenever he bought a stock, others who could learn about his moves followed suit as they knew it was a sure shot, said market sources.

Mr Khayer's family members -- his father Abul Kalam Matber, wife Kazi Sadia Hasan, other relatives, his business partner cricketer Shakib Al Hasan and four organisations -- Eshaal Communication, Monarch Mart, Monarch Express and Lava Electrodes Industries run by the family, have been penalised together.

This time, the BSEC slapped fines on them upon completion of hearings by its enforcement department based on investigation reports submitted by the Dhaka Stock Exchange (DSE).

An investigation by the DSE discovered the fraudulent activities committed by Mr Khayer and his allies.

The DSE inquiry team looked into Crystal Insurance's price movement between July 16, 2023 and September 12, 2023 on the prime bourse. In the two months, the stock jumped more than 107 per cent or by Tk 44.20 each share to Tk 85.40 per share.

The enforcement department of the securities regulator made the fine imposition reports public through the BSEC website early this month.

The DSE investigation revealed that Mr Khayer and his family members had engaged in coordinated transactions within their network and artificially inflated the insurer's stock price through serial trading, creating a false impression of high demand for shares even in a bearish market.

The manipulators used multiple brokerage houses and beneficiary owner's (BO) accounts to execute trades within their network.

This gave general investors the false impression that there was high demand for the stock, even though the market was depressed. This disrupted fair trading practices and violated capital market regulations.

As per section 17 of the Securities and Exchange Ordinance, 1969, no person shall, for the purpose of inducing, dissuading, effecting, preventing or in any manner influencing or turning to his advantage, sell or purchase any security, directly or indirectly.

Analyzing the relevant documents and trade pattern, the DSE team concluded that Mr Khayer and his associates had directly and indirectly influenced the movement of Crystal Insurance stock.

The BSEC emphasised that such manipulation harms investor confidence and violates securities laws.

According to BSEC enforcement department, Kanika Afroze has been fined Tk 5.9 million, Md Abul Khayer Tk 3.7 million, Kazi Sadia Hasan Tk 1.3 million, Abul Kalam Matber Tk 0.3 million, Shakib Al Hasan Tk 0.3 million, Humayun Kabir Tk 0.3 million, Md Zahead Kamal Tk 0.2 million, and Md Ashfaquzzaman Tk 0.1 million.

Among the organisations penalised, Eshaal Communication was fined Tk 8.5 million, Monarch Express Tk 2.2 million, Monarch Mart Tk 1.5 million and Lava Electrodes Industries Tk 0.3 million. These entities were also found to be involved in the share price manipulation of Crystal Insurance.

BSEC spokesperson Abul Kalam earlier said the securities regulator had been working to clear pending issues of non-compliance facing issuers, market operators, and controversial investors.

"The new commission wants to deliver a message that it will not be lenient with matters of non-compliance in a bid to restore investors' confidence," he said.

HOW DID MR KHAYER INFLUENCE STOCKS?

Currently serving as a deputy registrar at the Department of Cooperatives, Mr Khayer traded in shares not only from his own portfolio but also from other beneficiary owner's (BO) accounts opened in the names of his relatives, family members, and social organisations. He controls all the accounts.

He had been fined several times for manipulating more than 25 companies.

The newly-formed securities commission fined Mr Khayer and his family members Tk 1.35 billion in December last year for artificially inflating share prices of four companies between June and October 2021.

The regulator also imposed fines on Mr Khayer and his associates of Tk 140 million in September last year for unlawful trading in 11 stocks in 2022.

The same month the commission also penalised the ousted goodwill ambassador-- cricketer Shakib -- with Tk 5 million for his links to manipulation of the stock of Paramount Insurance.

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