Social Media Scams in the Indian Stock Market

Social Media Scam and Fraud Alert
Be aware of the social media scams in the Indian stock market 

With the increasing use of internet-based information, more and more people are using the internet to help them formulate their investment decisions. Social media is full of stock tips and advice, which may not be genuine. While the online information is available at your fingertips and offers effortless comparison, this same source is easier for fraudsters to lure you. Scammers quickly adapt to new ways to reach people and thus, have made the internet and social media their source to reach mass audiences in less time.

Facebook, Twitter, Telegram, WhatsApp, YouTube, and LinkedIn are among the most popular tools or platforms used by investors or prospective investors to gather information. Scamsters use this opportunity and offer investors fake recommendations, unsolicited investment tips, and misleading information under fake identity or anonymity. This practice of luring them into taking a wrong investment decision via social media is known as a social media scam. Below are a few techniques through which fraudsters are fooling investors.

Posting fake screenshots and testimonials from anonymous accounts

Over the last couple of years, many self-proclaimed market experts have taken to sharing screenshots of their portfolios/ trading positions on social media platforms. The majority of those who post such screenshots have an ulterior motive. Such channel owners use media platforms to earn quick money by fooling the audience.

The idea is to sell subscription services (stock tips) or technical analysis/derivative trading workshops to people who are new to investing. And since moderate gains are unlikely to impress potential customers, the figures are edited either by use of photoshop or changing a few lines of HTML code, to make the profits look outsized. The economics of such workshops are juicy. An expert charging Rs 20,000 for an online workshop can make a total of Rs 10 lakh over a weekend if 50 people sign up. People join such courses/workshops thinking they can become expert traders quickly by learning a few concepts.

Most of the paid service providers are also not good traders themselves. Often, these screenshots are faked with the aim of making the expert appear skilled at trading or identifying stocks, while the reality is altogether different. There is no way to check their credentials and past track records. They create fake profiles as successful traders and offer guaranteed returns and tips to lure greedy investors. They post false testimonies of other clients to build trust. Stock market beginners get swayed by the tricks and end up paying in the hopes of earning money through the market.

To verify the claims of such so-called experts, a few fintech companies have taken the first step. Fintech firm Sensibull has come out with a facility whereby traders wanting to post screenshots of their P&L can have it verified by Sensibull. The way it works is that Sensibull has tie-ups with various brokers, and so can verify the claims by accessing the data from the broker’s back end.

Taking this a step further is Covesto, which tracks the all-around performance of a trader and not just open positions. This gives the audience full transparency and control. Covesto is used by many fin-fluencers to build their credibility among their huge fanbase.

Artificially manipulating stock prices for personal gains

Market manipulation refers to artificial inflation or deflation of the price of a security. Also known as price manipulation or stock manipulation, it involves the literal manipulation of a financial market for personal gain. It means influencing the behavior of the securities with the intent to do so.

There are two major techniques of market manipulation: pump and dump, and poop and scoop.

Pump and Dump

Pump and dump is a manipulation technique that is used frequently in order to inflate the price of security artificially. In this kind of scam, operators who hold most of the shares encourage retail investors to buy the stock via the internet and then dump the shares once the price rises. On the other hand, the followers are left with overvalued security. This works on stocks with micro-market capitalization i.e. penny stocks.

Poop and Scoop

The poop and scoop technique is not as frequently used as the pump and dump. Here, the price of the stock of a medium or large-cap company is artificially deflated. Once it happens, the manipulator buys the undervalued shares, thus making a profit. Poop and scoop is rarer because it is significantly tougher to artificially affect the prices of a good company.

Social media account/ group owners with huge followership are capable of influencing people to buy or sell a stock. Such activities can easily impact the stock price or trading volume and they come under stock manipulation. Sometimes, they engage in unlawful activities to manipulate stocks in their favor by using tricks as mentioned below:

▪ Spreading false or misleading information about a company

▪ Engaging in a series of transactions to make a security appear more actively traded

▪ Rigging quotes, prices, or trades to make it look like there is more or less demand for a security than is the case

The problem with these recommendations is there is no accountability, no recourse, no qualification check of the advisor, the veracity of returns, and quality of the stock. Thus, social media has become a great playground for operators to run price manipulation schemes.

Companies also reach out to these influencers with a large following base for paid advertisements to boost the value of their shares through stock manipulation. In April 2022, Twitter was suddenly flooded with recommendations from several verified handles to invest in shares of Supreme Engineering Ltd. -- a special alloys and wire products manufacturer based in Mumbai -- after it secured a government contract. Following the online promotion, the penny stock gained close to 21%.

However, the market regulator - SEBI is making efforts to curb such social media frauds. Earlier last year, SEBI shut down a Telegram channel called “Bullrun2017” that purported to specialize in penny or small-cap stocks. Group administrators bought shares of small companies, recommended them to their 50,000 or so subscribers, and then sold them for a profit, according to a SEBI order. In March 2022, the regulator also raided premises linked to seven individuals and one company running nine Telegram channels with more than five million subscribers. They utilized a similar strategy of inflating prices and then selling stocks at a high.


While technology has introduced transparency, educated investors, and made participation in the capital markets convenient, it has opened new avenues for financial criminals to dupe investors as well. Most platforms are used as a tool by fin-fluencers to make money by fooling investors.

What lacks here is a transparent self-regulatory system. A system where the popularity and the rewards gained by an advisor are based on their performance and the usefulness of the advice. One such platform is Covesto. Covesto is a knowledge-sharing platform for traders in the Indian stock market. With the help of technology, Covesto tracks the performance of each expert for everyone to see. Only genuine experts are empowered with features to spread knowledge to the community.