Ajitansh Kar, Gurugram, 20 December 2023
Recently, SEBI has begun enforcing strict regulations against individuals who offer unsolicited advice and courses without holding the required capital markets licenses or certifications. Many Finfluencers have received fines because of SEBI’s latest action, and others have even had their access to the markets completely barred. The heaviest fine to date was levied against Baap of Charts (BOC), a YouTube and Twitter account that made money by providing courses and tips. BOC was ordered to pay over 17 crore rupees as fine. It was revealed that the individual masquerading as a skilled trader had lost about three crore of rupees himself. Another YouTuber, Abhishek Kar, was involved in a recent scandal as well. His calls were leaked, exposing that, despite constantly marketing trading advice and courses to his audience, he had been losing money on the F&O sector for the previous three years.
Following the epidemic, there was strong retail participation in the markets, and many newcomers were looking to try their luck and earn quick profits. When scammers saw how easy it would be to make money off these gullible and naive investors, they pounced. Some even claimed that their postings and courses could teach participants how to trade successfully in a matter of weeks. They encouraged individuals to imagine a wealthy future, which caused retail players to experience fears like FOMO and ultimately drew them in to paying these so-called trading experts an enormous sum. They did, in fact, take free videos off the internet, incorporate them into a course, and charge thousands of rupees for it.
The most common method these Finfluencers attempted to monetize their fan base was by offering trading calls and suggestions to users via YouTube videos as well as Telegram channels. Well-known influencers discovered that it was simpler to get customers to sign up for their services because a sizeable number of viewers followed them across many social media platforms, resulting in free promotion. Additionally, they began endorsing a range of illicit financial offerings and instruments that caused their audience to lose money while benefiting themselves. They also made money by employing the well-known pump and dump strategy, in which they would recommend to their followers penny stocks, or micro-cap companies, with barely any volume and liquidity.
Let us examine a case study of the famed Telegram scam in action:
Imagine you have a group of a thousand people that wants to acquire information from you for trading calls and advice. Getting them to trust you enough to pay for your subscription is the first step. You then split up the 1000 individuals into two groups of 500 each, offering each group several complimentary trading calls. At this point, you may choose any stock you want and instruct one group to go long on it while the other group goes short. Given that a stock has a 50/50 chance of rising or falling (let us assume that for simplicity). One of the groups will come out ahead, and the other will go in with disappointment over their loss. Now take these 500 individuals, split them up into groups of 250, and go through this process multiple times. In the end, you would have between 20 and 30 people who would be geared up to pay you a fee for future profitable trading ideas and would have faith in your capacity to trade.
A successful and lucrative future calls for knowing how to trade and invest is a mirage; there is no short route to financial success. Anyone who assures you of a return should be treated with caution and responsibility, and you ought to report them to the authorities.
