Shibli Rubayat, Reaz Islam banned for life in market over scam

The stock market regulator has permanently banned its former chairman Prof Shibli Rubayat Ul Islam, and LR Global Bangladesh CEO Reaz Islam from all capital market activities over their involvement in a share price manipulation scheme involving Padma Printers and Colour.

In 2022, asset management firm LR Global invested Tk 23.6 crore to acquire a 51 percent stake in Padma Printers, a delisted company, from six mutual funds it manages.

At the time, the company was shut down, and its net asset value per share stood at a negative Tk 2.74, according to a press release from the Bangladesh Securities and Exchange Commission (BSEC).

Despite this, LR Global paid Tk 289.4 per share, far above the face value of Tk 10. Just before the deal, Padma Printers shares were trading at Tk 13.60 each on the over-the-counter market.

After the purchase, Padma Printers was renamed Quest BDC Ltd, and its paid-up capital was raised from Tk 1.6 crore to Tk 50 crore. LR Global later injected another Tk 45 crore from the six mutual funds at Tk 15.88 per share.

During the process, no shares were issued to the company's previous shareholders, the BSEC said.

It added that no price-sensitive information was disclosed, nor was any extraordinary general meeting held as required by regulations.

The regulator said interests of the unitholders of those mutual funds were violated when Tk 68.64 crore of their funds was invested in a closed company.

It also found evidence of collusion between former BSEC chairman Shibli and LR Global CEO Reaz Islam in securing approval for the unlawful investment.

Following an investigation, the BSEC imposed a lifetime ban on both individuals from any capital market-related activity.

The commission also fined Reaz Islam, Rezaur Rahman Sohag, Brig Gen (retired) Sharif Ahsan, Medina Ali, Syed Kamrul Hoda, and Omar Soeb Chowdhury Tk 1 crore each for violating securities rules. All of them are representatives of the mutual funds.

The Daily Star immediately could not reach them for comments.

Besides, LR Global has been asked to return Tk 90 crore, including interest, to the six mutual funds within one month. The regulator warned that if the funds were not repaid in time, CEO Reaz Islam would be liable to pay Tk 98 crore, while directors George M Stock III and Rezaur Rahman Sohag would each face a Tk 1 crore fine.

The BSEC also decided to revoke LR Global's licence for investing in a financially weak company whose operations had ceased and which had a negative net asset value.

In addition, the regulator has fined Bangladesh General Insurance Company (BGIC), trustee of those six mutual funds, Tk 3 crore for failing to protect investor interests.

It also decided to ask the Financial Reporting Council (FRC) to take action against Shafiq Basak & Co for not preparing a proper audit report on Quest BDC Ltd for the financial year ending in June 2023.

The BSEC investigation further found that Quest BDC Ltd, formerly Padma Printers, had invested Tk 24.95 crore in Thyrocare Bangladesh by purchasing shares at Tk 52.25 each, though the face value was Tk 10.

According to the regulator, the valuation of Thyrocare was conducted by the then managing director of City Bank Capital Resources in collusion with LR Global's CEO Reaz Islam.

The commission said the manner of the investment raised suspicions of possible money laundering. It has therefore decided to refer the matter to the Anti-Corruption Commission (ACC) for further investigation.