SAT upholds Sebi case against Avadhut Sathe, but cuts deposit to ₹100 crore

The Securities Appellate Tribunal (SAT) on Thursday scaled back the market regulator’s order against Avadhut Sathe and his trading academy, but allowed its investigation to continue.

The tribunal directed Avadhut Sathe Trading Academy (ASTA) to deposit ₹100 crore into a fixed account, instead of the ₹546 crore demanded by the Securities and Exchange Board of India (Sebi) in its December order.

A bench, comprising presiding officer Justice P.S. Dinesh Kumar and technical member Meera Swarup, held that Sebi had made out a prima facie case that ASTA and its promoters may have violated Sebi’s Investment Advisers and Research Analysts regulations. The tribunal, however, put forth a lower deposit ask, coupled with restrictions on alienation of assets.

ASTA, which has been conducting stock market training programmes since 2008, challenged an ex-parte interim order-cum-show cause notice issued by the regulator on 4 December last year.

Sebi had alleged that, under the guise of investor education, Sathe and his academy were providing unregistered investment advisory and research analyst services using live market data, stock recommendations, targets and stop-losses, and had collected over ₹601 crore from more than 3.37 lakh participants. The academy also allegedlymisrepresented profits or losses made by its students on YouTube.

The regulator had directed the academy to deposit ₹546 crore, the alleged illegal gain, into a fixed deposit with a lein in favour of Sebi.

Before the tribunal, ASTA argued that its courses were purely educational and that Sebi had acted in violation of constitutional rights by passing an urgent order without first hearing its side, and that the direction to deposit the amount was impossible to comply with since its bank accounts had been frozen and the appellants had been barred from the stock market.

Sebi countered that the material seized during the investigation, including videos, WhatsApp messages and testimonials, showed that specific stock recommendations were being given and acted upon, even after an administrative warning was issued in March 2024.

The tribunal stopped short of recording any final findings on the factual allegations, noting that ASTA had chosen not to argue the merits at this stage, as it was yet to file its reply to the show cause notice. However, it observed that testimonials claiming large trading profits were uploaded on YouTube even after Sebi’s warning, that live market data was demonstrated in classes, and that paid WhatsApp groups existed where stock recommendations were shared. These elements, the bench said, were sufficient to establish a prima facie case warranting regulatory intervention.

On the question of monetary restraint, the tribunal took note of ASTA's submission that about ₹166 crore of the impugned amount was lying in government treasury and that the academy owned fixed assets worth about ₹100 crore. The bench then directed ASTA to deposit ₹100 crore and restrained it from alienating its fixed assets, instead of insisting on securing the full ₹546 crore at this interim stage.

The appeal was thus allowed in part. ASTA has been directed to disclose full details of its assets with valuation certificates and to file its reply to Sebi within four weeks.

The tribunal clarified that its observations were limited to deciding the appeal against the interim order and that Sebi would pass its final order independently after considering the academy’s response.