Nithin Kamath, the co-founder and CEO of Zerodha, has raised alarm over the increasing prevalence of fake trading app scams that are targeting unsuspecting investors.
These scams are characterised by fraudulent applications that closely imitate the interfaces of reputed brokerage platforms, luring users with promises of easy profits. Kamath’s warnings highlight the sophisticated tactics employed by scammers and the urgent need for investor awareness.
In a post shared on the social media platform X, Kamath wrote, “Fake trading app scams have exploded and have become a mega nuisance. These scams work by inducing you to trade and making you think that making money is easy.”
Nature of the scams
The scams typically begin with potential victims being added to WhatsApp groups where they are introduced to fake trading apps. These apps are designed to look legitimate, often mimicking the user interface of well-known brokerage firms. Initially, users may experience small gains in their trades, which serves to build their confidence and encourage further investment. Kamath explains on X, “So first, you are added to WhatsApp groups and then asked to install fake trading apps that look exactly like those of major brokers. On the first couple of trades, you will make money. This is designed to convince you that you can make a lot of money”
A long trail of victims
In the past few months, hundreds of individuals across the country have fallen victim to these scams, losing significant sums of money.
For example, the most recent case is of a Delhi man who was duped of Rs 1.15 crore in a stock market scam. In April, a businessman in Jayanagar lost Rs 5.2 crore in a sophisticated cybercrime. He was tricked into downloading a fraudulent app and transferring money under the guise of high-return investments.
Similarly, in March, a woman from Pune lost Rs 24.12 lakh of her savings in an online share trading fraud. She had sold her jewellery to invest in a get-rich-quick scheme promoted by conmen, who asked her to download a mobile phone application to start trading.
Shri Venkatesh, Managing Partner, SKV Law Offices, explains the legal aspect.
Nitin Kamath seems to be voicing concerns regarding prevalent phishing scams in the Indian capital market sector. This crime is punishable under Indian law – such as Section 66B, 66D, 66E etc. of the Information Technology Act, 2000 (IT Act) – which penalises ‘cheating by personation by using computer resource’ and under Section 318 of the Bhartiya Nyay Sanhita 2023, amongst others.
In fact, these scams often involve securing confidential information of the potential victims which itself is punishable under Section 66E of the IT Act. Besides the aforementioned laws, the criminal activities described herein are also illegal under Section 318 of the Bhartiya Nyay Sanhita which criminalises ‘cheating’.
Spot the red flags
Tanvi Kanchan, Head-UAE Business & Strategy at Anand Rathi Shares and Stock Brokers says, “It is crucial for investors to exercise caution and stay informed. I strongly urge all investors to thoroughly verify the authenticity of any trading platform before engaging. Stick to well-known and regulated brokers, and avoid apps promising quick riches, as these are often red flags. Educating yourself and seeking advice from trusted financial advisors can safeguard your investments and help you make informed decisions.”
First Published: Aug 27 2024 | 5:34 PM IST
