Markets regulator Sebi has cautioned investors against fraudulent WhatsApp stock-tip groups that use 'astroturfing'–fake endorsements and profit claims–to create a false impression of credibility and lure investors.
In a statement, Sebi said certain unregistered persons were offering stock recommendations to investors through invitation-only WhatsApp groups in the name of free investor education. The operators of these fraudulent groups often use overseas WhatsApp numbers posing as market experts.
“To make these calls look credible, certain members, acting in concert with the operators, post false claims of profit and praise the 'expert'. This practice, known as astroturfing, creates a false impression of genuine support and induces unsuspecting investors to act on the call,” Sebi said.
The regulator also highlighted a tactic used by such groups after enforcement agencies or regulatory bodies take action against them.
The Securities and Exchange Board of India (Sebi) noted that members are often contacted from a new number and invited to join another group, with operators claiming that the previous group had been banned due to social media platform restrictions.
One such message cited by Sebi reads, "Due to social media platform's risk control measures, our previous group has been banned. This new group will provide daily recommendations of quality stock information and trading guidance. Please join the group.”
Advising investors to exercise caution, Sebi said they should not join invitation-only WhatsApp groups operated by unknown persons or individuals claiming to be stock market experts, particularly those using overseas numbers.
Investors have also been advised not to be influenced by messages containing praise, profit claims or trade confirmations posted by other members, as such posts could be planted to create a misleading impression.
The regulator said messages claiming that a group had been suspended, closed or banned, and inviting members to join a new group should be treated as red flags.
It further advised investors against opening accounts on, or transferring money to, trading platforms or applications recommended by such groups. Investors should also refrain from sharing their investment holdings or trading account details with the operators, the regulator advised.
“Deal only with Sebi-registered intermediaries and use only authentic trading apps,” the regulator said, adding that investors could verify the registration status of intermediaries through its official website.
Sebi said the statement was intended to caution investors against acting on stock tips and trading calls circulated through such closed fraudulent WhatsApp groups and urged them to remain vigilant while dealing in the securities market.