Two Stock Market Scams Exposed: Protect Your Investments
The Indian stock market offers tremendous opportunities for wealth creation. However, it also harbours traps that can wipe out your savings. Recent investigations by SEBI have uncovered two alarming stock market scams that fooled thousands of investors. Let’s break down these scams so you can stay alert and safeguard your investments.
1. IPO Scam: The Trafiksol ITS Fraud
In May 2024, Trafiksol ITS Technologies, a company dealing with intelligent transportation systems, filed for an IPO to raise ₹45 crores. They claimed ₹17.7 crores would be used to purchase critical software from a third-party vendor. Investors rushed in, oversubscribing the IPO by 345 times.
However, SEBI’s investigation uncovered a shocking truth:
Key Findings:
- No Operational Capability: The vendor’s office was empty, and they lacked the skills to develop the promised software.
- Fake Financial Records: Financial statements were fabricated and submitted on the same day.
- Suspicious Selection Process: The vendor was introduced by a middleman, with no competitive bidding.
Outcome: SEBI cancelled the IPO, ordered refunds, and exposed the vendor as a shell company. This case highlights the need for thorough background checks before investing in IPOs.
2. The “Baap of Chart” Fraud
A popular financial influencer, known as “Baap of Chart,” promised guaranteed stock market returns through his online courses. Behind the scenes, he ran an unauthorised investment advisory service, collecting ₹17.2 crores from unsuspecting investors.
Key Findings:
- False Promises: Guaranteed returns that were never achieved.
- Hidden Losses: He concealed his own trading losses while advising clients.
- SEBI Action: Banned for a year and ordered to refund ₹17.2 crores with penalties.
Lesson: Avoid “gurus” promising guaranteed returns. Always verify credentials before investing.
How to Protect Yourself from Stock Market Scams
- Do Due Diligence: Research companies thoroughly before investing in IPOs.
- Verify Advisors: Ensure financial advisors are registered with SEBI.
- Beware of Guarantees: No one can promise guaranteed returns in the stock market.