Every other day, we come across one or the other types of investment scams.
Now what are these scams and why are they on the rise?
Let’s get into the detail.
With the availability of multiple platforms and options, people these days are trying new ways to invest their capital to generate a passive source of income.
However, many end up losing money by falling into various scams.
As investment options have increased in recent years, so does the scams targeting investors.
Here we have enlisted some of the common types of investment scams and details of how do investment scams work.
1. Ponzi Schemes
Ramesh: Suresh, see I came across one scheme where I will get a guaranteed return of 20% to 30%. Also, my return percentage will increase if I add more members under me who invest in this scheme too.
Suresh: So, with what amount are you planning to begin?
Ramesh: Well, I am thinking of putting ₹1,00,000.
Suresh: And how are you going to invest this amount? Means, is there any app or something?
Ramesh: No, the person who contacted me shared the company’s bank details with me.
Suresh: But why bank details? There must be a platform to do it the right way.
Ramesh: Yes, the company claims to collect funds from multiple investors and invest the entire amount in high-yield assets.
Suresh: But that is not right. Direct bank transfers without a secure, regulated platform are a significant red flag, as legitimate investments should go through authorized channels.
Ramesh: But I don’t find anything wrong with that. Even I suggest you invest under me and we will grow our investment together.
Suresh: No, I find it suspicious.
After a few days, while watching an expose video on the ADB YouTube channel.
Suresh: Ramesh, I just saw one video on that company where you invested your capital.
Ramesh: Yes Suresh, I know that I had been scammed. The overall scam was ₹500 crores and I also lost ₹50,00,000 in it.
Suresh: I warned you right from the beginning it seems like a Ponzi Scheme to me.
Now from the above conversation, it is clear that the Ponzi scheme generally offers you an investment plan with high return and zero risk. This attracts most of the beginners looking for valuable investment options.
However, incomplete research and lack of knowledge made them fall into scams like this, where a person first collects a large amount of sums from different investors in his bank account.
After making enough money or till the time he gets new investors he continues the scheme and finally runs off with the hard-earned money of victims.
The chances of recovering the amount lost in this scheme are almost impossible and hence investors need to stay vigilant and do thorough research before investing.
Here the most important thing is not to fall into the trap of high-return schemes and further avoid transferring funds to other’s bank accounts.
2. Pump and Dump
Ramesh: Suresh, see I have invested in this stock. It is hitting the upper circuit every day and by now I am in a profit of around 40%.
Suresh: That’s great! But from where have you found this stock?
Ramesh: I saw one video on YouTube. Big companies like TATA, and Reliance are investing in these companies.
Suresh: Show me that video.
Suresh after seeing that video link.
Ramesh this is an unlisted link. This means that this video is private and someone is trying to manipulate the stock price by circulating this link to people.
Ramesh: But how does that matter? It is for our good only. I have already gained 50% and planning to invest more.
Suresh: Ramesh, but this looks like a Pump & Dump Scam.
Ramesh: Pump & Dump? What’s that? Anyway, I don’t want to know as I am happy with my investment.
After a few days.
Suresh: Ramesh, what happened, why are looking so upset?
Ramesh: Suresh, I think you were right about that stock. The price of that stock crashed and now it is hitting a lower circuit. I am in a loss of 30% and not able to sell my holdings.
Suresh: You must stay alert Ramesh and always validate the details of stocks post recommendation. Look for the fundamentals and growth aspects of the company.
This is one of the types of investment scams in which promoters and operators trap retail investors for their interest.
Pump & Dump scam generally occurs in listed companies where promoters and other associated people first inflate the price of the stock of a particular company through misleading recommendations on social media and other platforms.
Once the price rises they sell off their holdings and the investors who invested in such stocks face major losses due to a sudden crash of the stock.
3. Fake Investment Platforms
Ramesh: I am planning to buy a new XUV car.
Suresh: Did you hit a jackpot or something?
Ramesh: Yeah, you could say that!
Suresh: Share that secret jackpot with me also.
Ramesh: See, I have downloaded this app and invested my ₹3,00,000 in this IPO. I got allotment and you know what I got around 10 times return.
Suresh: Ramesh, this is all fake. This is a clone app.
Ramesh: What clone app? I made a few investments earlier and withdrew some funds as well. Nothing is fake.
Suresh: Okay, tell me where you added funds for investment.
Ramesh: Well, I got one bank detail to transfer funds.
Suresh: See, that is something you missed. Whenever you invest using an app, you always transfer money to your investment or trading account not to any third-party bank account.
As far as clone trading is concerned, such fake apps mimic legitimate investment platforms but direct funds to scammers’ accounts instead of regulated brokerage firms.
Ramesh: This means I have been scammed?
Suresh: Yes! tell me who shared this link with you.
Ramesh: I got it on the Premium Telegram Group that I joined!
Suresh: I knew that these scams start from there only. Just wait for a few days and when you will try to withdraw your fake returns, the scammer will ask you to pay taxes or other fees.
Ramesh: Will I be able to withdraw my funds?
Suresh: No. You can try it if you want.
Ramesh tried to withdraw his investment, but unfortunately couldn’t and in this way, he got trapped in the scammers’ plan.
The above conversation between Ramesh and Suresh might have given you an idea of other types of investment scams where scammers use Fake investment platforms called clone apps.
These scams are on the rise because of people who blindly follow fininfluencers on social media.
Recently, one of the Investment scams on YouTube led to the loss of around ₹500 crores of victims. Even after reporting Cyber Crime can recover only ₹18 crores.
Now even after listening and reading such news why do people follow such people or channels?
In greed to make easy money and quick profits.
Ramesh in the above case fell for that and instead of earning any return, he ended up losing his hard-earned money in the investment scam.
4. Forex Trading Scams
Ramesh: Suresh, this new FnO rule of SEBI has disappointed me a lot. I have decided to trade in Forex now.
Suresh: Forex are you serious?
Ramesh: Yes, I am serious. What’s wrong with that?
Suresh: While Forex trading through regulated exchanges is allowed, trading through unregulated, international platforms is illegal in India. Aren’t you aware of the RBI regulation?
Ramesh: Now, what’s that?
Suresh: As per RBI, Forex trading is illegal and banned in India. There are some platforms like Quotex that RBI has enlisted in the banned list. Further, if you invest in such a platform and get scammed, you can’t even complain about the same.
Even if you do, you only have to pay the penalty of at least ₹10,000 for using illegal and banned platforms in India.
Ramesh: This is scary.
Suresh: Don’t tell me you have already added money or started investing.
Ramesh: I was about to after following the advisory of one of the traders on Telegram.
Suresh: Please stay away from this and first of all delete this Telegram app from your device.
In forex trading scams, the scammers lure traders by showing high returns on trading in the illegal forex market. Scammers generally guide them for binary trading and another format of trading that is neither regulated nor legal.
Eventually, the trader ends up losing their capital and is sometimes left with not even an option to report the complaint.
5. Telegram Prepaid Tasks Scam
Suresh: Hey Ramesh, What’s Up?
Ramesh: Just trying to complete my task.
Suresh: Task, but you are watching a YouTube video.
Ramesh: Yeah, that’s the task.
Suresh: Means?
Ramesh: See, I received this message on Telegram a few days back. They offered me a high-paying job for which I had to complete a few paid tasks per day. Tasks include watching YouTube videos, buying some products, and adding reviews and ratings, etc.
Initially, I started with ₹500, and by the end of the day I withdrew ₹2000.
Now after these tasks, they will guide me in investing in a cryptocurrency with ₹50,000 with a guaranteed return of 20%.
Suresh: Are you seriously going to do that?
Ramesh: Yes, and please don’t say it is illegal.
Suresh: No, it is not illegal but a scam. Anyway, I won’t say anything. See you after a few days.
After a few days.
Suresh: Hey Ramesh, so where does your investment reach?
Ramesh: What investment Suresh, I am just tired of fulfilling one after the other requirement to withdraw my funds.
Suresh: What exactly did they say?
Ramesh: They said that one of the tasks involving cryptocurrency investment went wrong which decreased my credit score and now to take it up to 100 I have to perform a few more investments.
By now, I have invested ₹5,00,000 and they are asking for more. I have taken a loan as well. I am just tired of all this and don’t know how to come out of this.
Suresh: First of all, stop where you are and report your case. By reporting promptly, you increase the chances of authorities catching the scammers and freezing their assets, potentially recovering part of your loss.
Ramesh: How to report investment scams?
Suresh: You can report this Crypto Scam to Cyber Crime. Draft everything in detail and upload all the transaction screenshots you have done to date
Ramesh: Will they help me?
Suresh: Cyber Crime will freeze the scammer account which will help you in recovering some part of your lost amount. Also for further help, you can submit your details here.
Ramesh: Thanks Suresh!
Telegram prepaid scams thus include some paid tasks where the scammer lures a person by providing regular returns. Once an amount is transferred to the scammer’s account, he either blocks the person or misguides him in the name of credit score or high commission.
Conclusion
Whatever the type of investment scam, the foremost step is to report it as soon as you encounter it. Most of these scams are run on an unregistered platform and hence one can file a cyber crime complaint.
To complain against investment scams done in the name of the registered entity or done by a registered entity one must lodge a complaint in SCORES portal of SEBI.
This is the solution but what one must focus upon is the prevention. Stay aware and get alert if you find anything suspicious in the investment schemes like high profit, guaranteed returns, zero risk, etc.
Once you learn to identify investment scams and how they work you can protect your capital from the evil eye of these scammers. So stay vigilant and do thorough research before investing.
