In today’s digital landscape, cyber criminals are constantly devising new ways to exploit unsuspecting individuals. One such prevalent scam is the trading or investment scam, where perpetrators create a group on the messaging platform and masquerade as representatives of well-known stockbroker firms or investment companies. Their primary objective is to manipulate and deceive individuals into investing their hard-earned money in various schemes or financial products. These cyber criminals or scammers employ persuasive techniques to entice potential victims. They make enticing promises of high returns, insider tips or exclusive investment opportunities, preying on individuals’ desire to grow their wealth. Once victims are convinced and invest their money, the scammers initially provide small returns or profits to gain trust and encourage further investments.
However, these seemingly profitable returns are often fabricated or funded using money from new victims, creating a false illusion of profitability.
As the scam progresses, the scammers turn to various tactics to extract more money from their victims. They may introduce unexpected fees, taxes or legal expenses that need to be paid before the promised profits can be released. By employing emotional manipulation or resorting to threats, they coerce victims into making additional payments, exploiting their vulnerability and fear of losing their initial investment.
Understanding the modus operandi of these trading /investment scams is crucial in protecting oneself from financial harm. By staying informed and vigilant, individuals can recognize the warning signs and make informed decisions when it comes to their investments.
The step-by-step breakdown of the scam along with implementing effective solutions is crucial in safeguarding yourself from falling prey to such deceitful practices and can help mitigate the risks associated with this scam-
The Scam Unveiled:
1. Advertisement: Victims receive advertisements on social media platforms or WhatsApp or other messaging platforms promoting free trading tips classes. These ads are designed to attract individuals interested in stock trading.
Solution: Be cautious when responding to advertisements or offers that promise unrealistic gains or free services. Verify the credibility of the source before engaging further.
2. Redirection to WhatsApp or other messaging Group: When victims click on the advertisement, they are redirected to an unknown WhatsApp group or messaging group.
Fraudsters use these groups to establish communication with the victims.
Solution: Exercise caution when joining unknown groups. Verify the authenticity of the group and the individuals involved before sharing any personal information.
3. Persuasion and Free Trading Tips: Fraudsters communicate with the victims through these WhatsApp groups and persuade them to invest by offering free trading tips. They make enticing claims about potential profits in stock trading.
Solution: Be skeptical of anyone offering guaranteed profits or free trading tips. Do thorough research and consult reputable financial advisors or stockbrokers before making any investment decisions.
4. Installation of Trading Applications: Victims are asked to install trading applications provided by the fraudsters for further guidance in trading stocks and earning profits. These applications are not registered under the Securities and Exchange Board of India (SEBI).
Solution: Only use trading applications and platforms that are registered and regulated by authorized financial authorities such as SEBI. Verify the legitimacy of any trading application before installing it.
5. Depositing Money: Victims register on the trading applications and start stock trading based on the fraudsters’ recommendations. They deposit money into bank accounts specified by the fraudsters.
Solution: Ensure that you are depositing money into legitimate and authorized bank accounts associated with regulated trading platforms. Avoid transferring funds to unknown or suspicious accounts.
6. Fake Profits: The trading applications display fake profits in the victims’ digital wallets to create an illusion of successful trading.
Solution: Always be skeptical of unrealistically high returns. Verify the authenticity of the trading platform, and regularly review and reconcile your investment statements and transactions.
7. Profit Withdrawal Restrictions: When victims attempt to withdraw their supposed profits from the digital wallet, they are informed that they can only do so once they reach a certain threshold, typically around ₹50 lakh or above.
Solution: Be cautious of any trading scheme that imposes arbitrary withdrawal restrictions or demands excessive profits as a prerequisite. Consult with authorized financial institutions or professionals to understand legitimate withdrawal procedures.
8. Tax Payment Demand: At a certain point, victims are asked to pay a tax amount on the profits earned. If they refuse, all communication is halted, and the victims realize they have been scammed. Solution: Legitimate tax payments are made directly to government authorities, not to individuals or unknown bank accounts. Verify any tax payment requests with official tax departments or seek professional advice.
Way Forward-
To handle this scam effectively, it is crucial to raise awareness among the public about these fraudulent practices. Individuals should exercise caution while engaging with unknown sources, avoid clicking on suspicious links, and refrain from sharing personal information with unverified entities. In case of any cyber-related offenses, victims should report the incidents to the National Cyber Crime Reporting Portal (www.cybercrime.gov.in) or contact the cybercrime helpline at 1930. By staying vigilant and implementing preventive measures, investors can protect themselves from falling victim to deceptive stock trading scams. Timely reporting is crucial.
Khushbu Jain is a practicing advocate in the Supreme Court and founding partner of the law firm, Ark Legal. She can be contacted on X: @advocatekhushbu