Stock Trading Fraud on the Rise: How to Protect Yourself from Cyber Scams

Cyber fraud is no longer confined to banking or online payment systems-it has even penetrated the stock market now. With the digitalization boom, cyber fraudsters have discovered new avenues to target investors in the form of online stock trading scams, which are spreading fast throughout the country.

What is Cyber Stock Trading Fraud?

Cyber stock trading fraud, known as cyber trading fraud, comprises scammers who scam unsuspecting investors by fake and misleading stock tips, training schemes, or fake trading programs. These thieves promise massive return or guaranteed investments in the share market, targeting people to help them recover their money from them.

Usually, these fraudsters provide investment opportunities through social media sites such as Facebook, Instagram, and X (formerly Twitter), with advertisements claiming easy money from the stock market. Once the potential victim is hooked by promises of quick and easy money, the scammer invites him or her to join an exclusive group on messaging apps like WhatsApp, Telegram, or Facebook.

How the Scam Works:

Once people enter these groups, they are assured of free lessons on stock investment and assured returns. Sometimes, even fake members are added to these groups for the appearance of legitimacy. Victims are then asked to download fake investment apps that appear to show real-time growth in their investments.

But the apps are designed to scam people. The victims see a growth in their "investment," but cannot withdraw any money. At some point, once the scammers have extracted enough, the victim is thrown out of the group, and the fake app is disabled, leaving them empty-handed.

Why Are These Scams Increasing?

The rise in online trading and mobile trading apps, along with the increasing number of Demat account holders, has given scammers a larger pool of potential victims. With more and more people investing in the stock market via online platforms, cyber frauds have found a new opportunity to target inexperienced investors.

How to Spot and Avoid the Scam:

Be wary of easy profits: Don't believe stock trading advertisements promising easy profits. Never, ever trust something if it sounds too good to be true, especially with social media.
Never trust unsolicited invitations: If an invitation comes through a messaging application or a scheme to "invest" or get "training," do not believe it. These are some of the commonest scams used to get people to fall into a trap.

Check Legitimacy: Always check if the app or platform is legitimate. Stock investments are regulated by the Securities and Exchange Board of India (SEBI). Hence, check if the app is SEBI-registered. Similarly, for NBFC, ensure that the app is licensed by RBI.

Use only the trusted platforms, such as Zerodha or Groww, to invest. These are well-known and regulated trading platforms. Avoid downloading APKs or apps from unknown sources that do not feature on Google Play Store or Apple's App Store.

The Growing Cyber Fraud Threat:

This leaves the threat of cyber fraud much larger as the stock market and online trading platforms expand further. Recently, one case was reported where a Chinese national was arrested in Delhi with a cyber fraud relating to a stock trading scam valued at 100 crore rupees. The scam occurred over WhatsApp groups, in which the accused duped many people into investing their money into fake trading schemes.

This underlines the critical awareness and vigilance required by investors. As online scams continue to grow, it becomes crucial for investors to stay informed about risks and take appropriate precautions before engaging in online stock trading.

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