Bulls run, scammers feast

What makes a stock soar? Strong earnings help. But sometimes, so do outright lies. A booming market only makes things easier. As a string of fraudulent companies crop up, we throw light on a few of them, detailing how they took investors for a ride. Bharat Global Bharat Global Developers executed a perfect playbook for market manipulation, using preferential allotments and bogus contracts to inflate its stock. It all started with a dramatic management shake-up in December 2023—new auditors, a fresh CFO, and a boardroom overhaul. Next, the company distributed shares to insiders at scandalously low prices: 31 insiders bagged shares at Rs 10 when the market price was Rs 120. Another 10 insiders were handed 35 lakh shares at Rs 210, giving them control over 99.5 per cent of the company. These carefully placed insiders sat tight during the six-month lock-in period. Then, as stock prices surged, they offloaded their holdings, pocketing a cool Rs 271 crore while unsuspecting retail investors were left holding the bag. The deception didn't stop there. The company manipulated its financial statements to show a sudden revenue surge despite having negligible assets and negative operating cash flow. It also issued a flurry of grandiose corporate announcements, claiming lucrative contracts with McCain India, Tata Agro, and UPL Agro—none of which had any verifiable association with the company. A supposed Dubai-based subsidiary turned out to be pure fiction. Even a routine supply deal with Reliance Industries was dressed up as a Rs 120 crore infrastructure project. In another textbook market-rigging tactic, it announced stock splits and bonus issues to generate investor interest and create liquidity before insiders made their exit. Your lesson: When a company's management changes overnight, and financials su