How many of you receive a message from your or other stock brokers for availing loan against your holdings?
Well, these days, it is common, and yes, many stock brokers are providing these benefits to their clients as well.
But at the same time, scammers are also finding loopholes and misusing this service for their benefit.
So, if you are someone having good holdings in your trading account, then continue reading as there is a lot more information and tips for protecting yourself from falling into the trap of such a scam.
Uncovering Emerging Loan Trading Scam
To explain this scam, let’s introduce you to our fictional character, Ravi.
Ravi, who is a seasoned trader and confident about his trading skills received a call from a so-called advisor. In the beginning, the advisor asked him some basic questions, like how much he invests per month, what is the current portfolio value, etc.
After reaping details, he then pitched his service, which was a trap.
Gently, he asked Ravi about his financial requirements and whether he was looking for a loan
On this Ravi mentioned the need for an education loan for his son who is about to be admitted to graduate college.
The scammer then explained how Ravi could take a loan against his portfolio at a very low interest rate. And in this case, the only requirement is to keep his holdings as a security with the company.
The advisor assured him that his Demat account would only be used as security and that his stocks were safe. All he needed to do was share his login details for verification
Ravi was hesitant but at the same time found it a good deal and after taking time to think, he agreed.
Soon after that, the fraudster sent over some impressive-looking documents, complete with the logos of well-known brokerage firms, seeking the trust of Ravi.
The Shocking Trap Closed
After a few days, while checking his trading app, Ravi was astonished to find that some of his shares were missing from his portfolio.
When he contacted the so-called financial advisor, he was met with vague responses and false assurances. Later, even he didn’t get that too. His calls went unanswered, and emails bounced back.
Finally, he realized that he had been scammed.
What Ravi didn’t know was that fraudsters had pledged his shares, taken margin loans in his name, and executed risky trades that wiped out his holdings. He wasn’t alone.
Many traders, drawn in by the same promise of easy money, had suffered similar fates.
A Growing Threat of Loan Trading Scams
Loan trading scams like this are becoming alarmingly common.
Fraudsters have evolved, using sophisticated tactics to lure investors into their trap. They claim to be SEBI-registered, throw around financial jargon, and even set up professional-looking websites to appear credible.
Victims are usually traders looking to leverage their holdings without liquidating them.
They are promised high-value loans, with the only requirement being access to their Demat accounts for “verification” purposes.
Once access is granted, scammers can pledge stocks, take out margin loans, or even sell shares without the investor’s consent. By the time the victim realizes what’s happening, the damage is done.
How Ravi Could Have Protected Himself?
Ravi who did great in his trading journey, just got trapped in the low-interest fake loan scheme. But he could have protected himself if he could have:
- Stayed cautious while dealing with the offer.
- Checked details of the advisor
- Not shared his demat account details.
- Checked for SEBI-registration
The scammer gave many red signals like low-interest loans, asking for a signed copy of Power of Attorney (PoA). But Ravi avoided all this only to lose his hard-earned money in the scam.
The only way left with Ravi is to report this scam. But what are the ways for that?
Like Ravi, many people failed to recovery because of one or the other reason, but if you have ever been trapped in such a scam or other online scams, check the details of how to report online frauds in India.
Conclusion
This case is a lesson for many traders who are doing great in the market.
They need to remember, that only stock market analysis is not enough. At the same time, it is important to be cautious when something unusual comes across them.
The stock market offers great opportunities, but only for those who stay vigilant and informed. Trust, but always verify
