Mumbai: Stay alert to stock market fraud on social media

There are several red flags that can alert one to fraud. Representation pic

A Mumbai based advocate (name withheld) and practicing in Delhi, who was keen to learn stock market trading, was amongst hundred plus investors to get duped in the latest Bombay Stock Exchange (BSE) online stock market trading scam, promising lucrative returns.

The advocate recently came across a stock market training advertisement on Instagram and came in contact with a person who identified himself as an MBA from Wharton School of the University of Pennsylvania, USA and worked as chief strategy analyst at a reputed stock broking and trading firm in India, having its corporate office in Mumbai and registered office in Delhi. The man provided her with a month-long free online training on stock market functioning. Impressed by the tips and techniques given by him, out of 47 stocks recommended between June 28 to July 16, 44 stocks achieved a return of 405%.

And before she could realise the modus operandi, it was too late, on a single day, she was duped to the tune of over Rs 22 lakh and now the advocate has lodged a case with Delhi Cyber Cell on July 13. The police investigations revealed all the phone numbers given by the man to the victim were fake. He had also created numerous fake content and articles online, including the company details. It is even suspected that the genuine company details were misused to gain the confidence of unsuspecting victims.

Cyber crimes are a challenge

"Cyber crimes require urgent attention as these perpetrators are exceptionally clever and exploit basic human psychology. They mimic legitimate stock apps, using SEBI and RBI registration numbers easily found online to build trust. Initially, to seem credible they provide genuine trade advice using AI and deepfake technology and deliver small profits in upper circuit stocks. Once trust is established, they offer big bait like IPO allotments, making victims feel fortunate. As a young lawyer, this scam not only took my money but also my credibility and my self-confidence. Stricter surveillance on social media ads and WhatsApp is crucial. Unsuspecting individuals can lose their entire life savings to such scams. The government must raise public awareness, as people have lost thousands of crores in similar stock market frauds with little to no recovery," said the advocate, as she shared her experience and cautioned the public at large.

Incident Overview:

On June 4, 2024, I encountered an advertisement on Instagram providing trading advisories. Upon clicking the link, I was directed to join a WhatsApp group named "A-111 Upxxx Servxxx Grxxx, having registered address in Delhi and corporate office in Mumbai." This was the first red flag, stay away from advertisements that offer stock tips.

Group and Admin Details:

The WhatsApp group appeared genuine with members discussing stock market fluctuations following the Lok Sabha elections. The group's admin provided stock market advice that initially seemed credible.

Initial Engagement:

I followed some of the admin's advice and purchased shares using my regular trading app. After a few days, the admin began promoting the purchase of IPOs and Upper Circuit stocks. I attempted to buy these through my regular app but was unsuccessful. This was the second red flag, IPOs not available on regular apps. This ought to have raised the suspicion of any person.

Interaction with the Customer Care Team:

The admin's team, consisting of three additional members, contacted me regularly, teaching the basics of investment for a few days. They gained my trust and persuaded me to join their app mimicking "Upxxx" International Trading App, claiming it was open to the public to secure votes for the group's admin in the "GTC Global Trade Competition." They further stated that they are providing free services till July 31 and after that they will be charging a monthly fee of R2,000 for investment advisory.

Downloading the App:

Unable to find the app suggested by them on the Apple Playstore, I downloaded it through a link provided by the customer care team. They assured me it was necessary as it was an international trading app. This was the third red flag, investment through an app that had to be downloaded through a link and not available through the play store on the smartphone, clearly needs to be avoided.

Initial Investments:

On July 5, 2024, I transferred an initial sum of R50,000 to the bank account of Riya Enterprises, UCO Bank, Current A/c No. 04860210004418. On the first day I followed their trading advice and bought the upper circuit shares suggested by the admin using their app which appreciated the next day as predicted. This gave me some confidence and the next day, I transferred rupees one lakh to the same account but was then asked to transfer money to another account due to daily limits. However, later they made the transfer at their end and the amount started reflecting in my portfolio on the app, the advocate said. The fourth red flag, the money is sent to a bank account with a name different from the name of the firm.

Major Investment:

She said, "I was informed of an IPO allotment worth R22.8 lakh on July 11, but due to paucity of funds I declined the offer. The teams contacted me and tried to gain my trust and convince me that it was a rare investment opportunity which I should not miss. They then asked me to exit the existing WhatsApp group thinking of it as an experiment. I sold my existing shares, mutual funds, and borrowed money from friends to invest, to raise money for the IPO. The funds were transferred to Aktara Mobile Store, Bandhan Bank, Malegaon and DP Foods and Products, The Cosmos Co-op Bank, Chennai." The fifth red flag is the lure of a never to miss opportunity, which should be avoided at all costs and never borrow money for investment in stocks.

Discovery of Fraud:

On July 12, 2024, the suggested IPO listed with a 99.5% profit on the stock market and my portfolio on the app showed an increase accordingly. When I tried to withdraw 25% of the profits, my money was blocked, citing another IPO allotment of over R1 crore. This raised my suspicions. Attempts to contact the admin and other group members were futile, as I received only curt replies but none of them answered the calls. "What's surprising is that they predict very accurately about the stocks likely to appreciate, which means they have insider information or are hoarding stocks to inflate the price. These frauds can wipe off millions," the advocate said.

Current Situation:

The team continues to contact me, trying to lure me into investing more money. After researching online, I realized it is an ongoing stock market scam. After she approached the Delhi Cyber Cell, a case was lodged and the investigation is being conducted under the supervision of assistant commissioner of police Manish Jorwal.

Cyber expert speaks

Professor Dr Triveni Singh, former IPS officer and cyber expert from Uttar Pradesh said, "Be alert and refrain from falling prey to any form of lucrative, profitable, heavy discounted advertisements on social media, including, WhatsApp, Facebook, Telegram, Instagram, etc., as almost 99 percent of such advertisements are nothing but invitation to get duped by cyber fraudsters. In the recent past, stock market scam, successful businessman tips on investing in stock market, job offers, real estate offers, Non-Agricultural (NA plots), etc., have increased multifold. We must understand that thousands of cyber fraudsters are working day in day out looking for gullible victims."

Professor Dr Triveni Singh, former IPS officer and cyber expert from Uttar Pradesh

"Keep away from anything that is being sold on social media, as it is nothing less than a booby trap. Telegram and Instagram have become the new interface of the cyber fraudsters and they can recreate profiles and websites within no time and moreover can even have banking interface links, connected to their platforms, which is sufficient to gain confidence of their potential victims. They even manage to get genuine bank accounts for receiving money and withdraw the same within no time, by giving a few thousand rupees to the account holder for lending his savings account for receiving fund transfers," Dr Singh said.

The Indian Cyber Crime Coordination Centre, under Ministry of Home Affairs, has cautioned the public from falling trap to such fake stock market online scams.

MODUS OPERANDI

▪ Sponsored Advertisements featuring deep fake videos and images of prominent individuals are currently being disseminated across platforms such as Facebook, Instagram, and Google, which are redirecting users to fraudulent WhatsApp/Telegram groups operated by cyber fraudsters, falsely presented as legitimate trading groups, investment advice platforms, or financial advisors.

▪ Promises and Recommendations: Within these groups, cyber fraudsters disseminate information regarding Stock Market, Stock Tips, Live Classes, and lure citizens to open Institutional Accounts with them to gain maximum profit through confirm Initial Public Offering (IPO) allotments.

▪ Fake Application / Website: Cyber criminals share Playstore / Appstore links or apk files of fake trading applications with potential victims for trading purposes.

▪ Deposit of Money: Indian mule bank accounts are given to potential victims for depositing money, initial payouts are made to gain trust, and after a significant amount is deposited, fraudsters stop communication and the citizens become victims of cyber financial fraud.

PRECAUTIONS

▪ Be extremely cautious of sponsored ads on Facebook, Instagram, or Google promoting investment groups on WhatsApp or Telegram, as these may be fraudulent.

▪ Be alert to impersonation by fraudsters as FIIs/FPOs, financial advisors, or reputable institutions.

▪ Avoid sharing sensitive financial information like bank details or login credentials with unknown entities.

▪ Stay aware of common investment scams and remain sceptical of offers that seem too good to be true like promising unrealistically high returns.

▪ Report cyber frauds immediately at www.cybercrime.gov.in or by calling 1930.
▪ For cyber safety tips, follow @cyberdost on social media.