New To Investments? Read This Before Taking Stock Tips On WhatsApp And Telegram Groups

NEW DELHI: Have you been invited to WhatsApp or Telegram groups that promote an obscure stock as the next great thing? If you have, you are most likely attempting to be drawn into a pump and dump operation. Market participants are increasingly utilising social media to entice naive investors into trades that invariably result in losses for the latter.

The Securities and Exchange Board of India (Sebi) has begun the crackdown against firms accused of being involved in a front-running scandal involving the messaging app Telegram.

According to sources, the agency launched search and seizure operations against firms situated in Gujarat’s Ahmedabad and Mehsana.

HOW DID IT OPERATE

According to the source, these entities ran Telegram channels with tens of thousands of subscribers. The strategy was to develop a position in equities before endorsing them on their channel.

Because most subscribers traded based on their suggestions, the shares used to rise. This enabled them to profitably square off their positions.

These entities are suspected of stock manipulation via chat apps such as Telegram.

They would acquire specific stocks and then publish messages in Telegram channels with a huge subscriber base aggressively selling the equities they had purchased. They would later close their positions after reaching a favourable price. These individuals were accused of making lakhs of dollars by defrauding people.

These seamsters’ mobile phones were seized by Sebi officials. An investigation uncovered multiple messages promoting stocks in which they held positions.

The officer went on to say that a thorough inquiry is being conducted into the situation.

Many first-time investors rely on the information given out in Telegram and WhatsApp groups to start trading, creating a breeding ground for fraudulent persons.

For many investors who are entering the capital markets for the first time during a record-breaking bull run, Telegram and WhatsApp are convenient sources of “hot recommendations.” Because of its relative secrecy and big user base in many stock investing channels, Telegram is the medium of choice for such operators.

Sebi cracked down on the distribution of tips and the release of price-sensitive information over WhatsApp in 2017.

The regulator time and again has cautioned individuals from the circulation of messages unsolicited stock tips and investment advice.

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