Money
How pig butchering scam is taking a toll on investors
Summary
- Too many fake apps and websites are luring investors with promises of huge returns.
The allure of making quick money from trading in the markets often leads to unpleasant consequences. A third-year IIT B-Tech student from Jaunpur in Uttar Pradesh thought he could strike it rich before he could finish his studies. There was some extra cash in his bank account at that time—the amount, which he got as part of a scholarship, was to be used for his upcoming semester fees. And the investment pitch from an online app of Bengaluru-based broker Fisdom proved too irresistible. Last week, however, he realized that he was the victim of the infamous ‘pig butchering scam’. It turned out that the app was masquerading as Fisdom and he had been swindled of his ₹2 lakh scholarship amount.
The IIT student, who did not want to named, is not the only victim of such growing number of frauds. A former executive with Oracle says she fell for the same fraud and invested ₹6 lakh. She, too, did not want to be identified because her family and friends were not aware about this misfortune.
To be sure, the pig butchering scam is a form of investment fraud wherein online scammers use a variety of deceptive tactics, include fake investment apps and websites, to persuade victims to invest more money before making the vanishing act. The magnitude of the fraud has forced authorities to sit up and take notice. Stock market exchanges have even issued a warning to investors, asking them to be wary. “Some unscrupulous persons/ entities operating through Indian and International mobile numbers, through social media platforms like WhatsApp Groups, Telegram Channels, Facebook, Instagram Channels, etc. are falsely claiming to be associated with reputed financial institutions, showcasing fake certificates purportedly issued by Sebi/ Exchanges," said one such warning from NSE.
Brokers such as Fisdom, Dhan, Fyers, and Choice Broking have also put out separate public notices cautioning investors that their company names are being used to lure people into trading.
“I have not told my family about this," said the IIT student, whose father works as a building supervisor. “I will now have to get a loan from someone to pay for the next semester"
Recently, The Times of India reported that a housewife had lost ₹90 lakh after investing in a fake app called ‘KKRPRO’, which she mistook for Kohlberg Kravis Roberts & Co, a US-based investment firm. By the time she saw social media posts about the scam, it was too late.
How it works
The first point of contact by a scammer starts with an Instagram or a Facebook ad. It might also come in the form of a random direct message (DM). The aim is to get you into a WhatsApp or a Telegram group. Note that all this is done using the name of a real company .
“I went on Google and searched for the name Fisdom. I saw it had good ratings and reviews. I also searched online for the name of the person I was interacting with" said the IIT student, who regrets not sending a message to the real person on LinkedIn despite checking out his profile on that site.
The student and the former Oracle executive, cited in the story earlier, had both joined WhatsApp groups, where the admin, or administrator, would recommend stocks every trading day at 2 pm. A typical group would have around 150 people and the admins went by the names of Karan Batra and Rakesh Singh, impersonating the chief operating officer and chief executive officer, respectively, of Fisdom Broking app. They used publicly available photos and information.
Some people in the group were designated as ‘professors’ who uploaded stock tips on these WhatsApp groups. Along with the trading tips that were shared on the group, some participants were posting screenshots of themselves making profitable trades daily and announcing future plans of owning luxury cars. “I rechecked and saw that the stocks they were recommending were giving profits consistently," said the former Oracle executive.
According to Fisdom, about 150 WhatsApp groups are operating in its name. If each one of them gives a different recommendation, one of the groups is bound to have winners. There could be other ways as well to fake such winners.
Besides regular investment updates, messages on work-life balance are posted on weekends to convince investors. On one Sunday, ‘Batra’ wrote in the group: “Do not forget to give the mind a little space and nutrition, let joy and peace naturally grow, at any time to life to take a deep breath, you will find: good everywhere, happiness is readily available. May you always be happy! Have a good weekend."
Once the admins gain people’s trust, they ask the participants to install an app in their mobile phones and log in with the credentials given to them. In this case, the app is even available in the Apple AppStore and so most victims think it is genuine.
The strange part was the transactions. Instead of transferring the amount directly to the broker like in the case of normal broking accounts, this app needs you to transfer funds to a beneficiary bank account. When this is done, the amount will reflect in your name in the app within 30 minutes.
When some users questioned why the funds could not be transferred directly, the admins replied that they were trading in ‘primary market operations’ and not regular market trading and this could not be done directly. To support their argument, they even posted an agreement signed between Fisdom and market regulator Sebi. That was fake as well.
To make their operations seem legitimate, the admins would allow partial withdrawal of the investment initially. When the student sold some shares and redeemed ₹750, they promptly credited the money back to his account. He regrets not withdrawing more at that time.
Participant investors were guaranteed 30-40% returns within one week. They were also told that the minimum quantity they could buy was in lots of 100 shares and this size kept increasing. When the former Oracle executive cross-checked this online, she found the price fluctuations to be correct and thought she was actually making money. She then started investing more. This happened till she, and the IIT student, came across a LinkedIn post by the real Karan Batra that said some miscreants were running a scam in his name.
The student immediately tried to withdraw his entire investment but was not allowed to do so. He was instead told to pay another ₹50,000 for violating the terms of the contract.
The former Oracle executive kept withdrawing from the app in small chunks and was also simultaneously trading to give the impression that she wasn’t exiting. She managed to withdraw around ₹5 lakh.
How to avoid the scamsters?
As the name suggests, a pig butchering scam first involves the scammer building a relationship with the victim, and after gaining their trust, extracting money from the victim. That is akin to how a butcher fattens his pig before the slaughter.
With scammers becoming more shrewd, it is increasingly becoming difficult to spot fake websites and apps. Tejas Khoday, CEO of Fyers Broking, said they even use the Sebi registration number.
Jay Prakash Gupta, founder of Dhan Broking, said users should first go to the Sebi website and check all details of brokers registered there and even contact the customer care number provided there.
Nithin Kamath, co-founder of Zerodha, in a post on X last month said, “After the Chinese loan apps scam, the latest scam from actors in China and other Asian countries is phishing websites. Fraudsters are creating hundreds of websites and trading apps that look similar to the websites of Indian brokers. Unwitting users who click on the app, download links, etc., will be prompted to download the fake app. The goal is to get people to transfer money by taking advantage of their familiarity with these apps."
Kamath warned people against replying to unknown messages on social media and other messaging platforms, strangers telling you to download apps, or someone promising returns that’s too good to be true. These are all red flags!
