Ketan Parekh SCAM💀: Things Hidden from You! | Ketan Parekh Scam Explained | Harsh Goela

Summary

The video script narrates the rise and fall of Ketan Parekh, a stockbroker inspired by Harshad Mehta, who orchestrated the second-largest scam in Indian stock market history. Operating under the radar, Parekh manipulated stocks through strategies like pump and dump and circular trading, involving institutional investors and promoters. His low-profile lifestyle and choice of the Calcutta Stock Exchange aided his operations. However, the dot-com bubble burst exposed the scam, leading to massive losses for retail investors and the collapse of banks involved, ultimately revealing a fraud estimated at 40,000 crores.

Takeaways

• 🚀 Ketan Parekh was inspired by Harshad Mehta and learned from his strategies to manipulate the stock market.
• 💼 Ketan Parekh started his career in his father's stockbroking business and later became a CEO.
• 🤝 He had good connections with businessmen, actors, and politicians, which he used to his advantage.
• 📉 The Harshad Mehta Scam in 1992 was a major event that influenced Ketan Parekh's approach to stock market manipulation.
• 🏦 Ketan Parekh used bank receipts and pay orders to create an illusion of credibility and secure large loans.
• 📈 He targeted small businesses with low market capital and high future prospects, particularly in the IT and telecom sectors.
• 📉 His strategies included 'pump and dump' and 'circular trading' to artificially inflate stock prices and then sell for profit.
• 💸 Ketan Parekh involved institutional investors and promoters in his schemes, leveraging their influence and capital.
• 📉 The dot-com bubble burst and subsequent crisis in 2001-2002 led to the downfall of Ketan Parekh's manipulation scheme.
• 💸 It is estimated that the Ketan Parekh scam amounted to a staggering 40,000 crores, causing massive losses to retail investors.

Q & A

Who is Ketan Parekh and what is his connection to Harshad Mehta?

Ketan Parekh is a stockbroker who was born into a business family and became the CEO of his father's stockbroking firm, NH Securities. He was inspired by Harshad Mehta and worked under him at Gromo Research & Asset Management, where Harshad Mehta became his mentor.

What was the Harshad Mehta Scam and how did it influence Ketan Parekh?

The Harshad Mehta Scam was a major financial scandal in India involving manipulation of the stock market by Harshad Mehta, leading to his arrest and the exposure of many involved. Ketan Parekh observed Harshad Mehta's system and learned from it, later attempting to execute a similar but more sophisticated scam.

How did Ketan Parekh modify Harshad Mehta's strategy in his own scam?

Ketan Parekh made two significant modifications to Harshad Mehta's strategy: he maintained a low profile to avoid media attention, and he targeted institutional investors and promoters for easier manipulation, rather than retail investors.

What were the four rules Ketan Parekh used to select stocks for manipulation?

Ketan Parekh's four rules for selecting stocks were: 1) the business should be small and easy to manipulate, 2) the company's market capital should be low, 3) the company's trading volume should be low, and 4) the company's future prospects should be high.

What was the significance of the ICE sector in Ketan Parekh's investment strategy?

The ICE sector, which stands for Information, Communication, and Entertainment, was significant in Ketan Parekh's strategy as he targeted low-liquidity IT and telecom firms during the dot-com boom, anticipating high returns and increased investor interest.

What are the two main strategies Ketan Parekh used to manipulate stock prices?

Ketan Parekh used two main strategies: 'pump and dump', where he would buy a significant stake in a company to inflate the stock price and then sell, leaving retail investors with devalued stocks; and 'circular trading', where he orchestrated trades between different parties to artificially inflate trading volumes and stock prices.

How did Ketan Parekh obtain the funds necessary to manipulate the stocks?

Ketan Parekh obtained funds by involving institutional investors and promoters, who were enticed by the prospect of increased stock prices. He also used bank pay orders as a form of collateral to secure loans from banks, which he then used to invest in the stocks.

What was the role of the Calcutta Stock Exchange in the Ketan Parekh scam?

Ketan Parekh chose to operate through the Calcutta Stock Exchange instead of the more scrutinized Bombay Stock Exchange, taking advantage of the looser regulations there to execute his manipulation strategies.

How did the dot-com bubble burst impact Ketan Parekh's operations?

The dot-com bubble burst led to a significant devaluation of IT and internet stocks globally, which affected Ketan Parekh's investments. The Bear Cartel exploited this by short-selling the overvalued stocks, leading to a massive sell-off and the eventual exposure of Ketan Parekh's scam.

What was the final outcome of the Ketan Parekh scam and its estimated value?

The Ketan Parekh scam was exposed after the banks he used for loans faced bankruptcy, leading to an RBI inquiry. The scam is estimated to have been worth 40,000 crores and had a significant impact on retail investors, some of whom suffered substantial financial losses.