{"id":245455,"date":"2020-02-10T19:40:49","date_gmt":"2020-02-10T14:10:49","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=245455"},"modified":"2024-02-02T14:10:42","modified_gmt":"2024-02-02T08:40:42","slug":"stock-market-scams-everyone-should-be-aware-of","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/featured\/stock-market-scams-everyone-should-be-aware-of","title":{"rendered":"Stock market scams everyone should be aware of"},"content":{"rendered":"

Hindi:<\/strong> \u0907\u0938 \u092a\u094b\u0938\u094d\u091f \u0915\u094b \u0939\u093f\u0902\u0926\u0940 \u092e\u0947\u0902 \u092a\u095d\u0928\u0947 \u0915\u0947 \u0932\u093f\u090f \u092f\u0939\u093e\u0901 \u0915\u094d\u0932\u093f\u0915 \u0915\u0930\u0947\u0902\u0964<\/a><\/p>\n

The lure of easy money is what attracts people to trading and investing, including yours truly. But like someone once said, \u201cStock markets are the toughest place in the world to make easy money in the long run\u201d. This realisation typically occurs when one is in a drawdown (the account is in loss). However, the <\/span>sunk cost fallacy <\/span><\/a>forces us to act irrationally in hopes of recovering losses. That weak moment is when even the sharpest amongst us fall prey to frauds. Below are the two most common ones that you need to be aware of.\u00a0<\/span><\/p>\n

The fraud adviser who creates an intentional loss\u00a0<\/span><\/h3>\n

When on a financial loss, most of us instinctively tend to believe anyone who claims that they can help us get out of it. Of course, there are many good advisers and trainers who possibly can, but there are also many fraudsters claiming to be market experts prowling on social media and waiting to prey if you show weakness.\u00a0<\/span><\/p>\n

While it is okay to pay a fee to a SEBI registered Investment adviser to help you out or to get trained by an expert on how to trade, what has to be avoided is sharing your login credentials to your account with any third party. While there might be many well-meaning advisers who might offer to trade on your behalf which might seem convenient, but it also exposes you to huge risk of a fraudster who can create a loss in your account using non-genuine trades and move your money to another trading account, making it very tough for you to even figure that you have been scammed.\u00a0<\/span><\/p>\n

How?<\/span><\/h4>\n

Over 30,000 options contracts are listed on the exchange, but only a fraction of them actively trade, while the rest are illiquid. These options contracts where there is no other trading are used by scammers to place illegitimate trades (buy high and sell low with the same account and in quick succession) which creates a loss in your account and profit in the other trading account. You would assume this is a genuine market loss, but it clearly isn\u2019t.\u00a0<\/span><\/p>\n

Apart from the loss, you are now also exposed to regulatory action. Any such trading activity in your account would be looked upon by the income tax department as money laundering (creating losses to avoid taxes, or convert white to black money or vice versa). SEBI considers such trades circular trading. Apart from the monetary penalty that such trades entail, you could potentially be banned for life from the markets by SEBI.<\/span><\/p>\n

What can you do?\u00a0<\/span><\/h4>\n