In today's FirstScroll, we tell the story of the biggest market-manipulation case in Indian history. A secretive American trading firm allegedly figured out how to move India's most-watched index like a puppet, made tens of thousands of crores, and got caught only because its own lawyers accidentally spilled the secret in a US courtroom. This one has everything: algorithms, a ₹4,843 crore freeze, and a trick so simple you'll understand it in two minutes.
The Story
Some scandals leak through whistleblowers. This one leaked through a lawsuit.
In 2024, Jane Street, a secretive US trading giant, sued two of its own former traders and the hedge fund Millennium, accusing them of stealing a hugely profitable trading strategy. During the case, lawyers let slip that the secret strategy was about... Indian options. Specifically, Bank Nifty options. A strategy reportedly worth billions of dollars a year.
Think about that. A firm most Indians had never heard of was making a fortune so large in India's markets that it went to war in a US court to protect the recipe.
India's regulator SEBI was listening. It began investigating, and what it found led to the most dramatic action in its history. On July 3, 2025, SEBI issued a 105-page order accusing Jane Street of manipulating India's indices, banning it from Indian markets and impounding ₹4,843.57 crore in alleged unlawful gains.
So what exactly did Jane Street allegedly do? Here's the beautiful, brutal mechanics, simplified.
First, understand the playground: India's options casino.
To get the trick, you need one wild fact about India. Our derivatives market is a global freak. India accounts for about 61% of ALL equity options contracts traded on Earth. Crores of retail traders bet daily on where indices like the Bank Nifty will close, especially on expiry day, when weekly options contracts settle.
And here's the imbalance that made everything possible. On one expiry day SEBI examined, Bank Nifty options saw $1.26 trillion in notional turnover, versus just $3.6 billion of trading in the actual underlying bank stocks. That's a 350-to-1 gap.
Picture it like this: the bets on the match were 350 times bigger than the match itself.
Now, if you're a giant with deep pockets, a dangerous idea appears. What if you spent money moving the small thing (the actual stocks), to profit from your positions in the massive thing (the options priced off those stocks)? Move the scoreboard, win the bets.
That, SEBI alleges, is exactly what happened.
The two-act play, allegedly run again and again.
According to SEBI's order, on expiry days Jane Street ran a strategy in two acts.
Act 1, the morning pump. In the first half of the day, Jane Street entities aggressively bought Bank Nifty constituent stocks and futures, heavyweights like Kotak Bank, SBI, and Axis Bank, often making up over 20% of the entire market's traded value in those stocks, frequently placing orders above the last traded price. On one examined day alone, it bought ₹4,370 crore of these stocks and futures in the morning. Effect: the bank stocks rise, and since they make up the index, the Bank Nifty rises.
Everyone watching the screen sees a rising index. Retail traders pile into bullish bets. But while pushing the index up with one hand, Jane Street's other hand was quietly doing the opposite: buying cheap puts and selling expensive call options, giant bets that the index would FALL.
Act 2, the afternoon dump. In the second half of the day, Jane Street reversed everything, aggressively selling the stocks it had bought. The index sinks into the close. And as it sinks, those put options it loaded up on explode in value, while the calls it sold expire worthless.
Yes, it lost some money buying high and selling low on the stocks. But that loss was pocket change against the options jackpot. SEBI's math across the examined period: about ₹7,700 crore in losses on stocks and futures, versus ₹43,289 crore in options profits, a net gain of roughly ₹36,502 crore.
Spend a rupee moving the scoreboard. Collect five from the bets. Allegedly repeat across 18 expiry days between January 2023 and 2025.
And who was on the other side of those bets?
This is the part that made SEBI furious. Every rupee of those options profits came from counterparties, and on Indian expiry days, that overwhelmingly means retail traders, the same small traders SEBI's own studies show lose money in 9 out of 10 cases. If the index's moves were being engineered, then lakhs of ordinary people were unknowingly betting against a rigged scoreboard.
Worse, SEBI says this wasn't a firm that didn't know better. The NSE had issued Jane Street an explicit advisory in February 2025 to stop these patterns. Per SEBI, the trading continued anyway, which is why the regulator wrote that the group "is not a good faith actor that can be, or deserves to be, trusted."
Where it stands now, and Jane Street's side.
To be fair, this saga is far from over, and Jane Street strongly disputes everything. Its defence: these were basic index arbitrage trades, a standard, legal strategy of profiting from price gaps between markets, not manipulation.
The firm deposited the full amount into escrow in July 2025, after which SEBI allowed it back into the market under watch. In September 2025 it appealed to the Securities Appellate Tribunal, claiming it was denied documents needed for its defence and even that a SEBI department's inspection found no manipulation. As of early 2026, the case grinds on through hearings. Courts, not headlines, will decide.
But whatever the verdict, the case has already changed India's markets. It supercharged SEBI's crackdown on the F&O frenzy, the same tightening that dented Zerodha's profits and the NSE's revenue, and it forced a global conversation about where clever trading ends and manipulation begins. The line SEBI drew is historic: even a "legal-looking" strategy can be manipulation if, at scale, it distorts the prices everyone else relies on.
So, how did a US firm allegedly game India's options market?
By spotting the deepest flaw in the world's biggest options casino: the bets had grown 350 times larger than the game they were betting on. Move the small game, and the giant pool of bets pays out. It took a leaked lawsuit for anyone to notice, a 105-page order to allege it, and it will take a courtroom to settle it.
The lesson for every retail trader is uncomfortable but vital: on expiry day, you're not just betting on the market. You may be betting against players who can move the market. In a casino that lopsided, the scoreboard itself can become the game.
Until next time...