Latest stock market scam: This company was selling something that does not exist

Ever heard of anything called Zacobite? Well, none had until this company got into a contract of selling something that doesn't even exist. Yes, that's true.

On July 13, 2019, Urja Global made an announcement that it entered into an agreement with Japan-based Nippon Shinyaku for the supply of Zacobite for five years. The cost of procurement was stated at $65.5 million with Urja making a 10 percent profit.

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However, a search of websites of Urja Global and Nippon Shinyaku by SEBI failed to show any mention of the word 'Zacobite'. Urja Global did not give SEBI any information about the product Zacobite based on either its own research or its past experience in dealing with Zacobite.

No information regarding Zacobite was found to be available in publicly available sources. A Google search for the term Zacobite did not return any significant result. There was no information on the internet or otherwise regarding the material or element Zacobite and its uses.

However, the only reality was a significant increase in Urja Global’s share price. Its stock rose from Rs 2.2 to Rs 3.1 after the company made the announcement of deal. Volumes rose from as low as 73,000 on July 11, 2019 to 93 lakh on July 16, 2019.

While the Japanese company has denied signing any such deal with Urja Global.

Urja Global submitted that it had fallen victim to a fraud committed by certain persons impersonating as representatives of Nippon. While the SEBI noted that the company had actively connived with such persons to create an artificial situation for making the corporate announcement dated July 13, 2019, which was false, misleading and inaccurate.

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The securities market regulator has banned Urja and four of its executives from the markets for two years.