Online trading scams have emerged as a major menace in India, with thousands of innocent individuals losing lakhs — even crores — in the lure of high returns through stock market investments, forex trading, or cryptocurrency. While the digital age offers immense financial opportunities, it also comes with significant risks, especially for those unaware of the complex workings of financial markets and the unscrupulous schemes prevalent in this domain.
However, some due diligence can help you stay safe from these scamsters. And if you still happen to fall prey to such fraud, some quick action on your part can help you recover your money.
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What Are Online Trading Scams?
Online trading scams involve fraudulent schemes where individuals are tricked into investing their money through fake trading platforms or in manipulated financial instruments with the promise of high returns. These scams take various forms, including but not limited to:
Fake stock trading platforms: Scammers create websites or apps that mimic legitimate stock or forex trading platforms. There have been many cases where scammers created fake apps that seek to mimic popular platforms with small tweaks in the spelling to hoodwink targets: a ‘Zarodha’ to mimic Zerodha, and ‘Dh-an’ to imitate Dhan. Many people trust these apps because they are available on Google Play Store or Apple App Store. Once reeled in, victims are encouraged to invest large sums of money
Ponzi schemes: Here, early investors are paid returns with the capital of new investors. These schemes usually collapse once the scammer can no longer recruit new participants.
Cryptocurrency scams: Given the growing popularity of cryptocurrencies, fraudsters set up fake cryptocurrency exchanges or promote non-existent cryptocurrencies, promising high returns within a short time.
Phishing attacks: Scammers use phishing techniques to steal personal and financial information, which they then use to siphon off money from the victim’s bank accounts.
These scams are sophisticated, and the perpetrators often operate from foreign jurisdictions, making it even harder to track them down.
How Do These Scams Operate?
Most online trading scams follow a similar modus operandi:
Step 1: Luring the victim
The scam typically begins with a promotional campaign, often through social media, online ads, or cold calls, promising lucrative returns with little to no risk. They send WhatsApp messages asking you if you are interested in learning about the share market, and if you want to earn more. Later, they add you in a WhatsApp group where you are made to believe you are one of 100s of members, but the others are just bots. These advertisements appear highly professional and are designed to build trust quickly.
Step 2: Creating trust
Once a potential victim shows interest, they ask them to buy a few shares from the popular trading platform. Once the victim has tasted some profit, they are directed to the fake application/platform or website. Scammers often provide fake data, references to reputed financial institutions, or testimonials from "successful investors" to convince the victim of the platform’s authenticity.
Step 3: Initial gains
To build confidence, the scammer allows the victim to make small profits in the initial stage of trading. These gains are either fake or minuscule but enough to entice the victim into making a larger investment. One of the easiest ways to deduce if you have been scammed is to check if you are asked to transfer money to a new bank account every time. This is because cybercrime police across India routinely close accounts related to such fraudulent activity.
Step 4: Sudden losses or account freezing
After the victim has deposited a significant amount of money, the fraudsters either engineer a sudden market crash, causing the victim to lose their entire investment, or they block access to the account altogether. In some cases, victims are asked to pay additional sums to “unlock” their accounts or withdraw their funds, leading to even more financial loss. Or victims are asked to pay tax on their earnings.
Step 5: Disappearing act
Once the victim has lost a substantial amount of money, the fraudsters typically vanish, shutting down the website or app and making it almost impossible for the victim to recover their funds without legal intervention.
How Can You Protect Yourself?
Research the platform thoroughly: Before investing, always check whether the trading platform is registered with regulatory authorities such as the Securities and Exchange Board of India (SEBI) or the Reserve Bank of India (RBI). A legitimate platform will be transparent about its credentials.
Beware of unrealistic returns: Any promise of guaranteed high returns with minimal risk is a major red flag. No legitimate investment offers guaranteed returns, especially in volatile markets like stocks, forex, or cryptocurrencies.
Use reputed brokers: Always trade through established and recognised brokers who have a proven track record. Avoid platforms or individuals who are not known within the financial industry.
Check number of app downloads, reviews and complaints: Conduct an online search for reviews, complaints, or any legal action taken against the platform you’re considering. Victims of scams often leave their stories online as warnings.
Monitor your investments closely: Regularly review your trading accounts, and never invest more than you are willing to lose.
If you get scammed, contact cybercrime authorities: If you have been scammed, report the scam immediately on cybercrime.gov.in, a government portal.
Can Legal Experts Help You Recover Your Money?
If you have fallen victim to an online trading scam, all hope is not lost. While these situations can be distressing, legal recourse is available.
Filing an FIR and cybercrime complaints: The first step is to file an FIR with the local police, and a complaint with the cybercrime cell. The Information Technology Act of 2000 and the law at large provide for stringent punishment against online fraudsters. However, these cases must be handled with precision to ensure that the investigation is thorough and fast.
Legal notices and civil suits: In some cases, legal notices can be sent to the perpetrators if they are identifiable, demanding repayment of the lost amount. A civil suit can also be filed under the Indian Contract Act or the Consumer Protection Act, claiming damages for fraudulent misrepresentation.
International legal assistance: Since many online trading scams operate across borders, legal experts with experience in international law and extradition can assist in pursuing the matter.
Class-action suits: If multiple victims are involved, a class-action lawsuit can be an effective strategy to bring the scammer to justice and recover funds collectively.
While online trading scams can be devastating, awareness is the first step towards prevention. Always exercise due diligence, and remember the age-old saying, “If it’s too good to be true, it probably is”. If you have already fallen victim to such a scam, you must act swiftly. With the right legal guidance and a thorough understanding of your rights under the law, there is a strong possibility of reclaiming your lost funds.
Never hesitate in seeking legal assistance from an advocate you trust. The process can be complex, but, with the right legal strategy, justice can be served, and your hard-earned money recovered.
The writer is an advocate at the Supreme Court of India.
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