Regulator’s Probe Uncovers Coordinated Market Manipulation and Corporate Fund Misuse in Nepal’s Capital Market

Kathmandu — A series of investigative reports prepared by the Securities Board of Nepal (SEBON) has exposed what appears to be a deeply coordinated network of market manipulation, fund misuse, and regulatory evasion involving prominent business figures and public companies. The findings, based on separate probes into the activities of Deepak Bhatt and Sulabh Agrawal, point to systemic vulnerabilities in Nepal’s capital market governance.

According to the regulator’s preliminary supervision reports for 2083 BS, the investigation reveals that public limited company funds were allegedly diverted and used to finance share purchases in the secondary market. The reports suggest that Bhatt, along with Subhi Agrawal—wife of Sulabh Agrawal—and other associates, used institutional resources to buy shares and settle transactions, effectively misusing corporate funds for private gain. Such practices, if proven, represent a serious breach of fiduciary responsibility and investor trust.

The scale of coordination outlined in the reports is particularly striking. Funds linked not only to public companies but also to subsidiaries of firms such as Himalayan Life Insurance Limited and Himalayan Reinsurance Limited were allegedly mobilized to support these trades. The investigation indicates that multiple individuals—including Rishiraj Mor and Raj Bahadur Shah—participated in these transactions, often acquiring shares and bonds without proper collateral or immediate settlement, thereby artificially supporting price movements.

The reports further allege that a deliberate strategy was employed to inflate stock prices. Shares and debentures acquired by Bhatt and associates were reportedly sold to institutions linked to the same network at elevated prices, creating an illusion of demand and pushing valuations upward. This pattern of circular trading—buying, inflating, and re-selling within a controlled ecosystem—suggests a structured attempt to manipulate market sentiment and mislead retail investors.

One of the most concerning revelations is the apparent centralization of trading operations. The investigation found that the online trading management systems (TMS) of multiple entities—including Bhrikuti Stock Broking, Himalayan Reinsurance, Himalayan Capserv, and several micro-insurance companies—were operated by a single individual. This raises serious questions about internal controls, compliance oversight, and the independence of transactions across entities that are supposed to function competitively.

SEBON’s findings also highlight how such coordination enabled price manipulation in specific stocks. In one instance, shares of Nepal Reinsurance Company were allegedly pushed from NPR 1,461 to NPR 1,686 through orchestrated trades involving brokers and institutional funds. By creating artificial demand using pooled resources, the network is believed to have influenced price discovery mechanisms, potentially trapping unsuspecting investors at inflated levels.

The probe into Sulabh Agrawal uncovers a different but equally concerning pattern—regulatory circumvention. As the then chairman of Himalayan Life Insurance, Agrawal was legally restricted from selling shares during his tenure. However, investigators allege that he bypassed this restriction by staging a family property partition case. Through a court-mediated settlement, over 800,000 shares were transferred to his son, Krishiv Agrawal, along with a cash component, after which the shares were sold in the market.

Technical analysis conducted by the regulator strengthens suspicions of coordinated control. Data obtained from Bhrikuti Stock Broking shows that the son’s trading account used the same email address, phone number, and even IP address as Sulabh Agrawal’s own trading activities. Such overlaps indicate that the transactions may not have been independent, reinforcing the allegation that the family transfer was merely a mechanism to bypass legal restrictions.

From a broader perspective, these findings point to systemic governance failures within Nepal’s capital market ecosystem. The alleged misuse of public funds, lack of segregation in trading operations, and exploitation of legal loopholes highlight gaps in regulatory enforcement and corporate accountability. Experts argue that if these practices are substantiated, they could undermine investor confidence and distort the integrity of the market.

SEBON has categorized several of these actions as fraudulent transactions under Section 98 of the Securities Act, 2006, and has forwarded the findings to Nepal Police headquarters for further investigation and legal action. The case is now expected to proceed through formal law enforcement channels, potentially leading to prosecutions and stricter regulatory scrutiny.

As investigations deepen, the unfolding developments are likely to have far-reaching implications—not only for the individuals and companies involved but also for the future regulatory framework of Nepal’s capital market. The case underscores the urgent need for stronger surveillance systems, enhanced transparency, and stricter enforcement to restore trust in the financial system.