The rise of fake WhatsApp groups has become a significant trend in India, posing substantial risk to both novice and seasoned investors.
According to the Indian Cyber Crime Coordination Centre (I4C), over 1 lakh investment scam cases were reported in 2023. In the first four months of 2024, Indians lost Rs 1.2 billion in 4,599 digital fraud cases. Trading scams accounted for 20,043 cases, resulting in losses of Rs 14.2 billion during this period. Additionally, Rs 2.22 billion was lost in 62,687 investment scam complaints, and dating apps caused a loss of Rs 132.3 million in 1,725 complaints. Overall, the total amount lost to cybercriminals by Indians between January and April 2024 stood at Rs 17.6 billion. (Data published by CloudSEK white papers and reports)
HOW SCAMSTERS REACH PEOPLE
In modern times, due to the widespread use of social media and the internet, people often share personal details publicly under the guise of KYC or while downloading applications on their devices. Collecting personal data is not difficult in today’s scenario.
Scammers can easily buy data from brokers, companies, and applications that reveal contact details and other information. These scammers reach out to the public using SMS, WhatsApp, emails, etc., employing the strategy of targeting thousands to find a few victims.
Their primary targets are the elderly, retirees, the unemployed or underemployed, and the youth. They send enticing and deceptive messages promising high returns and wealth, often claiming to provide market insights and the ability to make thousands or even lakhs within a week.
Here the scam can be further divided in two types:
- A) Sharing corrupted links and hacking into users’ accounts.
- B) Adding them as members to WhatsApp trading groups.
The first method of scams is now traditional, and people are becoming more aware of corrupted link and OTP scams, thanks to government awareness programs and extensive publicity on social media. Banks and financial institutions regularly inform their clients and customers not to click on unauthorized links or share any personal details with any bank or financial institution.
Scammers have now become more professional, advanced, and equipped with high-end technical knowledge.
They send text messages to individuals, inviting them to join their WhatsApp groups for free or, at times, for a nominal fee. They promise deep market insights and guaranteed returns. People seeking financial support often fall prey to these messages and join the WhatsApp groups, as it doesn’t require immediate payment or sharing personal information.
STAGES OF SCAM
Initially, the group appears normal and shares various trading tips on a daily basis. New traders hesitate to start trading immediately due to fear of losing money. To overcome this, scammers begin sending fake screenshots of supposed trades, claiming that their clients have made huge profits.
These messages create a sense of missing out among the onlooking members. As they see others making daily profits, their hesitation turns into action. Scammers ensure their clients make nominal profits in the beginning to build trust and keep them investing.
From here, the scam can be further divided into two categories:
- Motivating investors to trade on a regular basis to generate huge brokerage from them.
- Guiding them to download their application.
The first is less of a scam and more about the greediness of brokers to earn commissions or brokerage, irrespective of whether the client is making a profit or a loss, since brokerage has nothing to do with a client’s profit or loss in a trade. They play on the volume of clients.
If a client stops trading after losing money, these agents will hunt for new traders. With India being the world’s largest population, there is no shortage of new clients.
THE CURSE OF TECHNOLOGY
Modern scammers are well-equipped with information technology. They create their own trading applications that are not even registered with SEBI. These apps function like any other registered trading platform.
Unaware traders begin trading on these applications, assuming they are using a registered platform. New traders start making profits on a daily basis. Seeing their portfolio grow regularly, these traders begin investing larger amounts in hopes of even bigger profits.
Traders notice nothing unusual until the day they try to withdraw their investments. These fraudulent applications then block their money, and traders are unable to access their funds.
New traders can only withdraw a small portion of their money, or in the worst-case scenario, the applications claim that the amount has been transferred to their account, but the investors never receive any funds in their bank accounts.
At this point, the new investors realize they have been duped.
According to a report the most targeted countries are India, USA, Malaysia, Thailand and Vietnam.
ROLE OF OTHER SOCIAL MEDIA APPS
Other than WhatsApp, several social media platforms also play a major role in helping cybercriminals target the general public. Platforms like Facebook, Telegram, and Instagram are commonly targeted. Retired individuals, the underemployed, and youth are particularly active on these platforms.
Scammers create Facebook pages to spread information about trading through WhatsApp groups. They claim that their tips have helped many people generate wealth. They also post advertisements on their social media pages. The use of paid advertisements further contributes to the widespread reach of these pages among netizens.
Cybercriminals also create Instagram accounts using fake profile pictures of individuals who are associated with the finance industry, usually bankers or fund managers. These are well-known faces in the finance world. They use these accounts to spread fake tips, and once the target audience follows their account, they interact with them, pretending to be someone else.
Another method of scamming involves collaborating with up-and-coming influencers to create various reels while promoting their applications. In simple terms, they sponsor these influencers. These influencers often have a large social media following.
The influencers create lifestyle videos showcasing wealth and luxuries in their reels while subtly promoting these fake trading applications. They claim that their current lifestyle was earned by investing with these applications.
In reality, there are two victims here: one is the trader who is attracted to joining such trading applications or WhatsApp groups, and the other victim, in many cases, is the influencer themselves, who is often unaware that the application they are promoting is fake or fraudulent. This is a type of dual fraud.
There are also various channels available on Telegram promoting wealth and huge profits in a very short span of time.
THE TECH MAFIA
These tech mafias or scammers are not just individuals or a small group; they operate like a well-organized entity. They have teams, managers, marketing personnel, data providers, and more. In some cases, they even maintain a corporate office to appear legitimate and attract investors, building trust with them.
Their operation is a multi-level setup, with trained individuals focused on tasks such as collecting or buying data. They have a large team dedicated to forwarding messages or texts, a social media marketing team, lead managers, and even customer care executives who attend calls to keep their victims in the dark.
They use online data to purchase fake SIM cards, buy multiple cell phones, and eventually create WhatsApp trading groups. Interestingly, the majority of members in these groups are the scammers themselves. They pretend to be different people and post fake screenshots of their trading activities, showcasing huge profits from bulk deals, large portfolio sizes, etc.
Eventually, an individual’s FOMO (fear of missing out) kicks in, and they begin investing in the applications, constantly adding more money to build their portfolios. As these fake applications continue to show false profits, the individual keeps investing, only to lose all their money in the end, falling prey to these new-generation “TECH MAFIAS.”
WHY PEOPLE EASILY FALL PREY?
There are various reasons, mostly psychological, why people continue to fall prey to such scams, even though they are more advanced and financially literate compared to the past:
- Promise of Quick and Easy Profits
- Social Proof and Testimonials
- FOMO (Fear of Missing Out)
- Lack of Financial Literacy
- Peer Influence and Social Media
- Psychological Manipulation
- Initial Success or “Fake Profits”
- Lack of Awareness About Scams
- Cleverly Designed Fake Platforms.
Breaking the Chain: How to Stay Safe from WhatsApp Trading Scams
To prevent individuals and governments from losing money in fake WhatsApp group trading scams, here are 20 preventive measures that can be taken:
- Public Awareness Campaigns.
- Tightening Regulations on Online Trading
- Blocking Fraudulent Websites and Groups.
- Collaboration with Telecom Companies
- Monitoring social media and Messaging Platforms
- Setting Up Dedicated Reporting Channels
- Enforcing Anti-Money Laundering Laws
- Publicizing Arrests and Legal Actions.
- International Collaboration.
- Investor Protection Schemes
- Do Not Trust Unsolicited Message
- Verify the Legitimacy of Trading Groups.
- Avoid Sharing Personal Information
- Research Investment Offers
- Consult Professional Advisors
- Use Secure Payment Methods
- Enable Two-Factor Authentication
- Limit Group Participation
- Watch for Red Flags
- Educate Others
By combining government regulations and individual precautions, the risks of falling victim to fake WhatsApp trading scams can be significantly reduced.
(The writer is a faculty for Taxation and Finance with St Peter Degree College, Vasai, Maharashtra)
