The stock market is often seen as a way to grow wealth, but it has also become a hotspot for fraudsters who lure investors with promises of unrealistic returns. Stock market scams have evolved with digital trading platforms, online apps, and social media promotions. Many people, including first-time investors, have lost their hard-earned money due to fraudulent schemes.
In this blog, we explain what a stock market scam is, common types of frauds, real risks, and the legal remedies available in India.
What is a Stock Market Scam?
A stock market scam is a fraudulent activity where scammers manipulate or misrepresent financial products, companies, or trading platforms to deceive investors and steal money. These scams can be carried out by fake brokers, fraudulent apps, or even organized syndicates promising guaranteed profits.
Common Types of Stock Market Scams in India
1. Pump and Dump Schemes
Fraudsters artificially inflate the price of a stock through fake news, false promotions, or social media hype. Once investors start buying, scammers sell their shares at a high price, leaving others with heavy losses.
2. Fake Online Trading Platforms
Many people fall victim to fake stock trading apps or websites that promise easy profits. These platforms often disappear overnight with investor funds.
3. Insider Trading Scams
Certain groups misuse confidential company information to manipulate the stock price before the information is made public. This is illegal under Indian securities law.
4. Ponzi Schemes in Stock Investment
Fraudsters collect money by promising huge returns from stock investments but actually pay old investors with money collected from new ones.
5. Algorithm & Tip-Based Fraud
Some apps and individuals claim to provide 100% accurate stock tips or AI-based trading bots, but these are often scams to extract subscription fees or steal money.
How to Identify a Stock Market Scam
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Unrealistic Returns: If someone promises “guaranteed” profits of 30–40% monthly, it’s a red flag.
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Unregistered Brokers: Always check if the broker or advisor is registered with SEBI (Securities and Exchange Board of India).
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Pressure to Invest Quickly: Fraudsters often create a sense of urgency to trap investors.
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Lack of Transparency: If you don’t understand where your money is being invested, avoid the scheme.
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Fake Apps & Websites: Always download apps from verified sources like Google Play Store or Apple App Store.
Legal Remedies for Stock Market Scam Victims in India
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File a Complaint with SEBI
Victims can lodge a complaint on SCORES (SEBI Complaints Redress System) against fraudulent brokers or advisors. -
Approach Cyber Crime Cell
If the scam happened via online trading platforms or fake apps, file a complaint with the cybercrime portal (www.cybercrime.gov.in) or call the helpline 1930. -
Police FIR under IPC & IT Act
Sections like IPC 420 (Cheating), IPC 406 (Criminal Breach of Trust), and IT Act provisions can be applied against fraudsters. -
Consumer Court & Civil Remedies
Victims can approach the Consumer Forum for financial recovery or file a civil suit for compensation. -
Engage a Stock Market Scam Lawyer
A specialized cyber crime lawyer or securities fraud advocate can help in filing the right applications and court orders to recover money.
Safety Tips to Avoid Stock Market Scams
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Invest only through SEBI-registered brokers.
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Do not trust random WhatsApp/Telegram trading groups.
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Double-check any app before linking your bank account.
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Never share your Demat/Trading account password with anyone.
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Research properly before investing in penny stocks or unknown companies.
Stock market scams are rising in India due to the growth of online trading platforms and digital apps. While the stock market itself is a genuine opportunity to grow wealth, fraudsters exploit greed and lack of awareness. By staying informed, verifying sources, and seeking legal help when required, you can safeguard your investments.
Disclaimer
This blog is for informational purposes only and should not be treated as legal advice. We are not doing any advertisement or solicitation work. If you are a victim of stock market or cyber fraud, immediately contact the National Cyber Crime Helpline (1930) and file a complaint on www.cybercrime.gov.in