Fraud SMS For Stock Tips Is Destroying Investors: Warning About ‘Pump And Dump’ Scam For Stock Investors

Online fraud hasn’t escaped India’s biggest stock broker, Zerodha, and the company has issued cautions for investors to be aware of scams. Zerodha has warned investors of trading on anonymous and false stock tips. 

Zerodha has asked investors to be alert against “pump and dump” scams.

How do these scams at Zerodha work? Let’s find out!

Zerodha Issues Cautions About Fake Tip Messages; Explains MO Of Fraudsters

As revealed by Zerodha in their blog post, operators choose illiquid stocks that are not traded actively, after which they start sending messages through SMS, Telegram, and WhatsApp for increasing the stock price. When the price rises continuously the fraudsters who hold these stocks keep offloading them in large quantities. 

The blog post says, “As the price keeps going up, these operators keep offloading the stocks in large quantities. And these stocks start hitting lower circuits for months together leaving investors trapped.”

Another MO of the fraudsters is that the name ‘Zerodha’ is modified to fool people, such as ‘ZRODHA’, ‘ZERDHA’. 

Zerodha was founded in 2010 and is the largest retail stock broker in India on the base of active clients. As per reports, Zerodha makes up for 2 percent of daily retail volumes in Indian stock exchanges. Zerodha Kite has a client base of 9 lakh customers.

Here’s What Can You Do If You Already Invested In Fake Stocks

The blog contains illustrations and charts of the three stocks about which the fraud messages are being spread – Agrophos, 7NR Retail, and Mauria Udyog. The blog warns, “Please remember that there are no get rich schemes and most of these stocks have dubious fundamentals at best. Please stay away from trading or investing based on stock tips messages and calls.”

If you have already invested in these stocks, there is not much you can do except placing an AMO order, because these “stocks hit the lower circuits exactly at the market open”. 

Zerodha has asked investors to report any messages that they get to the authorities. Investors that receive any tips about unsolicited stock tips can report these numbers to the TRAI (Telecom Regulatory Authority of India), and file a complaint with the SEBI SCORES as well. They can also report the messages to the BSE and NSE exchange tiplines.

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