Making millions out of share manipulations: Govt official Hiru faces cases as fines unpaid

Government official Abul Khayer, alias Hiru, is a big investor in the capital market, big enough to influence it the way he wants: when he buys a share, others follow suit as they know it is going to be a sure shot. By leveraging this huge influence, he manipulated the price of many stocks, making in the process a quick profit.

Over such manipulations in around a dozen companies, the Bangladesh Securities and Exchange Commission (BSEC) fined him and his associates at different times in 2022. As they did not pay the fine within the stipulated time, the regulator has now filed four cases to recover the dues.

The market regulator fined the defendants more than Tk14 crore for serious violations of securities law by influencing the share prices of 11 companies, according to an enforcement report from the commission. 

Nearly two years have passed, but Khayer and his family members have paid only around Tk5 crore until 15 October, the officials added.

BSEC spokesperson Rezaul Karim told The Business Standard that the Enforcement Department has filed four certificate cases against the defendants to recover the outstanding fines.

As the defendants failed to pay the fines within the stipulated 30 days, the previous commission, led by Shibli Rubayat-Ul Islam, who resigned days after the fall of Sheikh Hasina's government on 5 August, had extended the deadline by one year.

Khayer had applied for an additional year to clear the outstanding amount of about Tk10 crore in 12 instalments. But on 18 September, the commission rejected the request and proceeded with filing the cases.

The commission extended time once to pay the remaining amount, but we could not pay the fine because the market was not good.

Abul Khayer

When asked, Abul Khayer told TBS, "We have paid Tk5-6 crore of the fine to the commission."

He added, "The commission had extended the time once to pay the remaining amount, but we could not pay the fine because the market was not good, and we could not sell shares." 

According to an enforcement report, Khayer and his associates were involved in manipulating the shares of Green Delta Insurance, Dhaka Insurance, Asia Insurance, Fortune Shoes, One Bank, NRBC Bank, BD Com Online, IPDC, Bangladesh National Insurance, Genex Infosys, and Paramount Insurance.

Family members are also fined

The commission fined Khayer, his wife Kazi Sadia Hasan, his father Abul Kalam Matber, and his companies, DIT Co-operative and Desh Ideal Co-operative, around Tk14 crore in 2022 after obtaining proof of share manipulation in 11 companies, including several in the insurance sector.

According to reports of the BSEC enforcement department, their realised capital gains were around Tk50 crore, while their unrealised capital gains were around Tk100 crore.

Realised capital gains refer to the profit made after buying and selling shares, while unrealised capital gains occur when shares have been purchased but not yet sold, despite being available for sale.

Khayer and his associates faced fresh fines for their involvement in manipulating the shares of Paramount Insurance.

On 24 September, the commission imposed a fine totalling Tk1.63 crore on cricketer Shakib Al Hasan, Khayer, and their companies – Eashaal Communication, Monarch Mart, Lava Electronics Industries – as well as Abul Kalam Matber.

Eashaal Communication received the highest fine of Tk75 lakh, followed by Tk50 lakh for Shakib, Tk25 lakh for Khayer, and Tk1 lakh each for Monarch Mart, Lava Electronics Industries, and Matber.

On 7 October, the commission informed the finance ministry about the fines imposed on Khayer and his associates. The letter, a copy of which has been obtained by TBS, noted that Khayer, a government employee, along with his associates, manipulated share transactions of various companies in the capital market at different times. This manipulation caused significant losses for general investors, undermining market development.

Who is the man in question?

Abul Khayer currently serves as a deputy registrar at the Department of Cooperatives.

In addition to trading through a beneficiary owner (BO) account under his own name, Khayer has engaged in share trading using multiple BO accounts opened in the names of his relatives, family members, and social organisations, all of which he controlled. 

According to an enforcement report, Khayer personally submitted statements on behalf of himself and his family members during commission hearings following each allegation of share manipulation.

Laws violated in share trading and penalties

According to a report by the commission, Hiru and his associates committed offences punishable under Sections 17(e)(v), (1), and (ii) of the Securities Act, which carry a minimum fine of Tk5 lakh and the potential for a criminal case to be filed.

Furthermore, by acquiring more than the stipulated 10% of shares in certain companies, they violated the acquisition and takeover rules.

Section 17 of the Securities and Exchange Ordinance states that no person shall, for the purpose of inducing, dissuading, effecting, preventing, or in any way influencing or turning to their advantage, the sale or purchase of any security, either directly or indirectly.

Subsection (e) of Section 17 adds, "No person shall engage in any act, practice, or course of business, or omit to do any act, which operates or would operate as a fraud, deceit, or manipulation upon any person. In particular, no one shall make any fictitious quotation or create a false and misleading appearance of active trading in any security."

Additionally, the rules state that no one shall directly or indirectly affect a series of transactions in any security to create the appearance of active trading, artificially raise the price to induce others to purchase, or depress the price to induce sales.

Regarding penalties, the ordinance states that anyone who contravenes the provisions of Section 17 shall be punishable by imprisonment for a term that may extend to five years, or with a fine of no less than Tk5 lakh, or both.

According to a report by the Enforcement Department, the realised capital gains from Khayer and his Associates' manipulation of IPDC shares amounted to Tk6.61 crore, with Khayer personally gaining Tk2.24 crore and his father gaining Tk4.11 crore.

In terms of unrealised capital gains, Khayer, his wife, his father, and DIT Co-operative made gains of Tk12.95 crore, Tk2.03 crore, Tk3.28 crore, Tk1.97 crore, and Tk1.35 crore, respectively.

Despite these substantial profits from manipulation, the commission fined Khayer only Tk1.5 crore.

Additionally, the unrealised capital gains of Khayer and his associates from the manipulation of NRB Commercial Bank shares totalled Tk23.33 crore. In this case, Konika Afroze, a relative of Hiru, and her associates were fined Tk3.75 crore.

Abul Kalam Matber and his associates realised gains of Tk14.35 crore through the manipulation of One Bank shares, with unrealised gains also amounting to Tk14.35 crore. Matber and his associates were fined Tk3 crore.

Hiru's wife, Sadia Hasan, and her associates realised capital gains of Tk1.88 crore through the manipulation of Green Delta Insurance shares, with unrealised gains of Tk57 lakh. For violating share trading laws, Sadia Hasan and her associates were fined Tk42 lakh.

Khayer's name was also linked to the manipulation of Dhaka Insurance shares. He realised capital gains of Tk4.36 crore by buying and selling shares through his own and his wife's BO accounts, with unrealised gains of Tk95 lakh. Sadia Hasan and her associates were fined Tk95 lakh for violating share transaction laws.

Hiru was also fined for manipulating the shares of Asia Insurance Ltd. Desh Ideal Trust Co-operative, of which Hiru is the managing director, realised gains of Tk3.24 crore from share manipulation in the insurance sector, with unrealised gains of Tk5.24 crore. Desh Ideal was fined Tk72 lakh by the commission for its role in the share manipulation.

The realised capital gains of Matber and his associates from the manipulation of Fortune Shoes shares amounted to Tk6.13 crore, while the unrealised capital gains were Tk23.89 crore. The commission fined Matber and his associates Tk1.50 crore for violating securities laws and engaging in manipulation.

The commission also fined DIT Co-Operative Ltd and its associates Tk55 lakh for the manipulation of shares of BDCOM Online. The realised capital gains from this manipulation amounted to Tk1.70 crore, with unrealised gains of Tk2.71 crore.

Additionally, the commission found DIT Co-Operative and Sadia involved in the manipulation of shares of Bangladesh National Insurance Company. As a result, the commission fined DIT Co-Operative Tk35 lakh and Sadia and her associates Tk1.40 crore.