Whatsapp investing scams: Red flags to watch out for
Social media messaging platforms have become a fertile ground for scamsters to tempt investors with the promise of making a quick buck. Investment groups created on Whatsapp and Telegram are now misappropriating identities of established brands and reputed professionals to lure individuals into bogus stock tips and trading courses.This writer received the following invite via Whatsapp, purportedly from a renowned fund house some time ago: “As PGIM Global Funds celebrates its fifth anniversary in India, we are celebrating through an online event with the aim of repaying the support and love of Indian investment enthusiasts. This group will share high-quality investment portfolios and selected stocks for free every day, leading everyone to make money. Students can follow our news every day and verify our strength!”
This modus operandi is now very common. Fraudsters try to lure investors by masquerading as reputed individual fund managers, financial advisers and even finfluencers. Investment scams are being run in the name of expert investors like Porinju Veliyath and Ajay Kacholia, among others. The use of such reputed names gives a sense of legitimacy to the entire operation. Santosh Joseph, Founder, Germinate Investor Services, “These scamsters prey on investors’ appetite for stock tips, particularly coming from star names.”
For instance, one such group ‘Federated Hermès’ misappropriated the identity of renowned fund manager Pankaj Tibrewal to conduct stock market classes and send messages in Whatsapp groups. The Whatsapp message read, “Mr Pankaj will recommend daily limit stocks to all participating students in a live broadcast. Please participate on time.” In another scam, the identity of widely followed finfluencer Rachana Ranade was blatantly used to lure investors. “I will personally select stocks that are expected to rise in April. Join our Whatsapp group. Every day, we pick a reliable stock. First 1,000 members get it for free,” the account impersonating her claimed. The group even used Ranade’s image as its profile picture.
Apart from impersonation, these scamsters use a variety of tactics to get you to bite. Some position themselves as an investment academy or class, featuring a ‘professor’ or ‘teacher’, usually the person being impersonated. The discussions on the group chats are typically scripted. Members of the group often sound hyped about the upcoming opportunity or put forth queries about the trading programme. Typically, these active participants are affiliates, roleplaying to mislead others in the group. Rahul Ghose, CEO, Hedged.in, observes, “Messages planted by their own affiliates gives the entire set-up a feel of legitimacy.”
Some even allude to instances of trading gains made previously under the guidance of the ‘teacher’, offering screenshots as proof. The idea is to generate a sense of FOMO (fear of missing out) among the unsuspecting members. These scamsters further put pressure by creating a sense of urgency. They urge you to avail of ‘limited time opportunity’ or risk losing out on a profitable trade. Another bait is to offer investors a ‘trial’ period, where they can test the waters at no cost. Initial stock tips may be offered free of charge, as a confidence-building measure.
Many of these scams are essentially ‘pump and dump’ operations. The idea is to tempt people into buying stocks that the scamsters or their associates are already holding. Through circular trading they artificially boost the price of the share. Once enough people have bought, the scamsters quietly sell their holdings at a huge profit, sending the stock price plummeting. Other investing scams simply entice people into transferring money in exchange for more rewarding tips or recommendations. The tips are bogus, so they create multiple groups of investors, suggesting different investing ideas to each. Ghose remarks, “Conflicting ‘buy-sell’ calls are sent to each group. Since a few ‘ideas’ will pay off, members of relevant groups are pitched more ideas and encouraged to invest more money. Other groups are simply killed off, and so the cycle continues.”
Investors whose initial smaller bets yield profits become easy prey for the actual ripoff. They are invited to put in larger sums of money, to earn bigger payoffs. They get tempted with offers of ‘elite’ or ‘VIP’ membership, supposedly available only to a select few. Scamsters often prod investors to transfer funds via a link or to an account shared privately. Once gullible investors pour in large sums of money, the scamsters freeze withdrawals, sever all connections and vanish with the funds.
Watch out for these red flags
Investors must watch out for some tell-tale signs of fraud. If you get a random invite to a trading community from unknown contacts, be wary. Do not fall for the ‘get rich quick’ or ‘guaranteed return’ pitch. If it sounds too good to be true, it usually is. “Stay away from stock tips, irrespective of anyone sharing it,” exhorts Joseph. If the investing group claims affiliation with a name or brand you trust, verify its authenticity by reaching out to the person or company via social media or e-mail, suggests Ghose. Most likely, they will flag a scam. Finally, be suspicious when requested to send money via unverified links or download third-party apps.
HOW WHATSAPP INVESTING SCAMS OPERATE
Victim gets added to random Whatsapp investing group. Multiple other groups get created simultaneously.Profile of star investor and his credentials are shared with group members.Discussions start in group, with one set of members creating hype about the upcoming ‘lessons’ or ‘opportunities’.Initial stock tips are shared on group free of cost. Conflicting tips shared on other groups.Tips work in favour of some groups. Members of these groups are nudged to invest in more ideas. Other groups are simply killed off.Actively participating members are encouraged to invest in special programmes with promises of even bigger rewards.When a victim refuses to transfer more funds or tries to withdraw funds, account gets disabled. Whatsapp group is deactivated and affiliates stop responding, vanishing with victims’ funds.
This story originally appeared on: India Times - Author:Faqs of Insurances
