Stock market scams and how to avoid them – Phishing Trading Accounts

“Click here to win an iPhone for INR 1,000!?”

“Your broking account funds are blocked. Click here to update KYC.”

“Beware of frauds. Secure your credit card XXXX on this link.”

Ever clicked on messages or emails like these? They will usually have a link that will take you to a homoglyph website. A homoglyph website is fake but looks real. It may look like amazon.com or flipkart.com but will actually be “amzon” or “flpkrt” or “amazon”.

A closer look at these words will show they are fake. If you mistake such a website to be real and make payment, it stealthily stores your banking details and password. Next thing you know, your bank balance is zero.

When an email, website, message, or phone call is meant to trick you into giving private information, it is called Phishing. Phishing may be used to steal from your bank account or collect your personal information. Your personal information may be sold to marketing companies looking to send you push emails or messages for their clients. Some unscrupulous elements might also use your personal information to blackmail you into giving large amounts of ransom.

Stock markets are full of phishing scams. Let us look at some examples.

1. Someone pretending to be your stock broker might send you an SMS. It will require you to update your KYC on a link. Next thing you know, all your stock holdings are sold, and some illiquid option contracts are bought into your account.
2. Fraudsters may pose as Registered Investment Advisors (RIAs) and trick you into willingly sharing your broking account credentials. Here again, you may lose all your investments, and the fraudster could use your funds to take loss-making bets.
3. Fraudsters may use social engineering or brute force to hack into email accounts that do not have two-factor authentication (2FA) security. Using email access, trading account details can be reset.

And how does a fraudster make money by taking access to your trading account?

1. Sell all holdings and buy an illiquid option at a high price from your trading account.
2. Sell this option from the fraudster’s own account.
3. Reversal: Sell the option from your account at a low price.
4. Buy this option at a low price from the fraudster’s own account.

Similarly, fraudsters could also use phishing to buy penny stocks in several victims’ accounts. By buying and selling within these victim accounts, they could pump up the stock price, giving fraudsters a higher price to dump the stock. The investors might be left with worthless stocks bought at inflated prices.

Phishing is a very common practice to scam gullible investors in the stock markets and the gullible people at large. Be cautious, and do not share your personal information with unverified calls, numbers, and emails.