How a scammer duped Indian investors of 1500 crore INR via SMS stock Tip scam ?

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The life of the common man

Ajay is a young professional working in the corporate sector in a metro city in India.
Apart from his job he likes to dabble into stocks, crypto and financial products that can give him a handsome return.
Offer him a tip for quick money making and he is all ears.

His neighbor is a senior citizen who retired a few years ago with limited resources even he is keen to make some extra money to meet his expenses and support himself and his family.
Both these set of people are living in an environment which offers pressures in terms of limited income, rising prices and inflation.

Genuine opportunities to earn more are hard to come by and even more difficult to identify a genuine investment opportunity.

Both Ajay and his neighbor receive a tip via SMS to buy a particular stock that is about to receive a price pump.
The SMS link seems credible because the sender name looks similar to the trading site which they use to trade.

They follow the recommendation and buy the stock without much thought.
It is a penny stock which would be pumped the tip says.
They can afford to be greedy and buy one hundred, a thousand or as many number of shares they want to buy after all the more they buy the more they make as that is the rule of the market.

So they go ahead and make a purchase.
However the stock rises only a little and begins to fall it keeps falling and price and the money they invested individually dwindles in terms of the holding value.
Cut to the present and their holding is worth nothing and they are left clutching on to worthless stocks in their portfolio.

Are these individual cases? No this is the story of numerous or rather tens of thousands of people across the country. People who got duped by the same method and lost their hard earned money.

While the investors sulk those recommending these stocks got rich by selling these dud stocks and are enjoying their riches and looking forward to dupe the next set of unsuspecting investors.

Let us understand the scam

This is a scam that involves market manipulation. The modus operandi involved sending bulk SMSes as well as creating circulation of tips via online forums and websites.
This is done with the intention of duping the unsuspecting public.

How the scam was operated

The scammer created fake SMS IDs which resemble those of well known leading broking companies.
These SMS ID's were used to send stock tips and recommendations to numerous unsuspecting investors.
The messages contained information about stock recommendations.
The messages were designed in such a way that they appears to be coming from reputed sources and this made people trust these messages.
The messages were designed as stock tips which promised gains in short period of time.

In addition to these messages the same stocks were also promoted on numerous websites ends.

This created a dubious web of false information. The scammer propagating this scam would prompt users to buy dud penny stock in this manner.
These scams are rampant and the scammers often trick and manipulate users into scams and Ponzi schemes.

The scammers target the general populous by way of targeting the mobile user base who are also into trading stocks.

When the end users and traders see this tips they are susceptible to make purchases and trades lured by the greed of a quick profit.

The stocks that are being recommended are already being manipulated by the scammers.
They may be low value dud stocks which no one is buying.
The scammers buy them over time and create false trades to generate volume.
By way of creating buy sell orders they create false information and the stock charts of these dud stocks come alive.

The gullible investors fall for these kind of traps and make investments.
Most of the time the accounts selling these stocks are those of the scammers.
After offloading their stocks the scammers are richer and the investors are left high and dry holding onto worthless stocks.

Once they have duped one set of investors they rinse and repeat with new set of stocks and new set of investors.

How bad can be the damage by these scams ?

If we watch the numbers of just one scammer identified by the name of Hanif Sheikh then one finds that as per an order of SEBI official Mr SK Mohanty dated June 19th 2023 Hanif Sheikh manipulated 5 stocks and with this made gains of the amount of Rs 144 crores Indian rupees.

The stocks which were being manipulated were

• Mauria Udyog,
• 7NR Retail,
• GBL Industries and
• Darjeeling Ropeway Co
  In addition his name also appears in stock manipulation of scrips like Leading Leasing Finance and Investment, Agrophos India Pvt Ltd, VB Industries Pvt. Ltd.

What happens to the scammers ?

Often these scammers have a well laid out exit and escape plan.

It is alleged that by the time the authorities went after Hanif sheikh he wad already escaped the country and was enjoying a high profile life.

This information does not come from official sources but from his social media accounts where he is seen splurging his riches.

The investigation led into the working of the scammers

While investigating the complaints from several investors via their online grievance platform the investigation lead to a trail of 226 entities linked to Sheikh with multiple bank accounts and logs of fund transfers in Ahmedabad, Mumbai and Kolkata.

SEBI obtained the SMS compilations, forex bills, trading logs, Gmail links as well as the call data records which had links to the promoters of small companies.

The investigation has resulted in identifying Kasambhai Shekh, Hasina Kasambhai Shekh, Robert Resources, Econo Trade India, Econo Broking (formerly Bansal Finstock) and Sai Metaltech among those directly linked to Shekh.

Interestingly the online profile of Hanif Sheikh is been built as

• An Entrepreneur
• Private equity and start-up investor
• Green-ship recycler at Alang Port and
• Managing director of Econo Broking

Scammer had multiple brushes with authorities

Apparently SEBI was on the trail of Hanif Sheikh for quite some time.

Sheikhs brush with SEBI involved a fine of Rs 7 lakhs for evading multiple summon and recovery of penalties against Hanif Sheikh sheikh who was identified as an economic offender.

While the investors suffer the scammers are enjoying

Those duped lost their money yet the scammers are at large enjoying their ill gotten wealth.

Conclusion

These scams are getting more and more common and the only way to save the unsuspecting investors would be faster redressal and investigation into such complaints.
However the best course of action would be investor education to tell investors about such scams and how to deal with such unsolicited offers via SMSes mails and dubious websites.

Posted Using LeoFinance Alpha