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The Bangladesh Securities and Exchange Commission (BSEC) has decided to initiate strict legal action against those involved in the fraudulent 2019 initial public offering (IPO) of Ring Shine Textiles. The move includes requesting a travel ban and referring the case to the Anti-Corruption Commission (ACC) for further investigation and prosecution.

In a press release issued on Monday, the BSEC announced that a total of nine individuals, including the sponsors, former directors, former managing director, and former executive director of Ring Shine Textiles, will face punitive action for their roles in manipulating the IPO process.

Among those implicated is Abdul Kader Faruk, Chairman of Far Group, who is widely believed to be the mastermind behind the scam. Also facing action are auditors and issue managers who allegedly facilitated the fraudulent listing.

The BSEC has asked the ACC to investigate a controversial agreement between Ring Shine’s directors and Mr. Faruk, which allowed him to manage the IPO without officially engaging an issue manager — a clear violation of capital market rules.

📊 The Scam in Detail

Prior to the IPO, Ring Shine Textiles had a paid-up capital of only Tk 100 million. However, to raise Tk 1.5 billion through public shares, the company falsely claimed to have issued 275.10 million shares at Tk 10 each via private placements — without actually receiving any money. This allowed the company to inflate its paid-up capital to Tk 2.85 billion just before its stock market debut in 2019.

Two separate investigations — one by the BSEC in 2020 and a special audit by Hoda Vasi Chowdhury & Co in 2021 — confirmed the fraudulent activities.

✈️ Travel Ban and Regulatory Actions

The BSEC has imposed a travel ban on 13 individuals, including:

• Abdul Kader Faruk
• Indian national Ashok Kumar Chirmar, who brokered the deal
• Sponsors, ex-directors, and former top executives of Ring Shine

Several of the accused allegedly fled the country after selling their pre-IPO shares — which they had obtained for free — once the company was listed. Funds were reportedly diverted overseas under the guise of purchasing machinery and assets.

⚖️ Sanctions on Firms and Professionals

The BSEC has also taken strong regulatory measures:

• AFC Capital and CAPM Advisory, the IPO issue managers, are being barred from all capital market activities for five years for issuing false due-diligence certificates.
  • Note: AFC Capital had already surrendered its license in December 2023.
• Licences of both firms will be revoked, according to BSEC.
• Four auditing firms are being penalized for certifying fabricated financial reports:
  • Ahmed & Akhter
  • Shiraz Khan Basak & Co
  • Mahfel Huq & Co
  • ATK Khan & Co
    These firms will also be referred to the Financial Reporting Council (FRC) for further disciplinary action.

🔍 ACC Involvement and Next Steps

Individuals who illegally obtained placement shares without making any payments will also be investigated by the ACC. The BSEC emphasized that it is committed to restoring integrity in the capital market and holding all wrongdoers accountable.