Every 2-3 calls out of 10 that we receive are related to algo trading scams. What are these scams, how do fraudsters reach out to you, and how can you protect yourself from such frauds?
SEBI introduced algo trading software to make life easier for retail traders, enabling them to perform high-frequency trades with a better probability of profit. However, some tech-savvy people and other scammers have used this opportunity to make money for themselves by targeting those with the least knowledge of the concept.
How do Scammers Reach out to You?
Generally, through Telegram, Instagram, and these days, WhatsApp. They show you fake profit screenshots and claim that their algo software made it all possible.
Innocent traders, lacking market knowledge and unaware of regulations, pay huge fees to access software that either doesn’t exist or doesn’t work as advertised.
A Man Lost Around ₹2 Lakh in Algo Trading Scam
One recent case involved a man losing ₹2 lakh after being lured by profit screenshots on WhatsApp shared by a scammer.
It all happened with Mr. Amrit saw an ad for an algo trading software on Instagram, promising guaranteed returns of ₹2,000 to ₹3,000 per day. He clicked the link and submitted his details.
He was then added to a WhatsApp group where he saw enticing profit screenshots and decided to pay for the software.
The software fee was INR 38k per month, but he lost ₹5,000 in the first trade. When he contacted them, they gave an excuse of a technical glitch. For a few days, the software didn’t work. When he reached out again, they asked for ₹1 lakh for premium services with guaranteed returns.
Mr. Amrit paid ₹1 lakh, after which the scammer asked him to add another ₹1 lakh to his trading account and share his ID and password. After multiple losses totaling INR 70k.
Mr. Amrit discovered that no trades were executed using the algo trading software. Instead, the scammer was manually trading using his account. When he raised his concerns, the scammer blocked his number.
Who is Responsible for the Loss?
First, SEBI, for not taking adequate responsibility to create awareness among retail traders about rules and regulations related to account opening, algo trading, advisory, etc.
Many retail traders are unaware that authentic and reliable algo trading software must be registered and licensed by the stock exchange.
Second, the victim himself, who fell for the greed of earning unrealistic returns. Without market knowledge and awareness of algo trading regulations, he paid the scammer’s fees.
He also ignored the red flags when he lost his capital in the first trade and paid a huge sum of money again.
The lack of awareness, greed to double their capital are some of the major reason for losses and the increasing number of trading scams.
It is therefore important for retail traders to be aware of such regulations and validate the background of any entity offering stock market-related products and services.
