Ponzi schemes, fake trading apps and market scams: How to stay safe in online trading

The stock market has long been a lucrative avenue for wealth creation, offering individuals and institutions an opportunity to multiply their investments. However, with high rewards come high risks, and in today’s digital era, these risks extend beyond market fluctuations to include fraudulent schemes, cyber threats, and misinformation.

Without proper investor knowledge, technological literacy, and vigilance, individuals can easily fall prey to market manipulation, Ponzi schemes, and online fraud. The rapid advancement of digital trading platforms and financial technologies (FinTech) has further necessitated the need for investors to stay informed and proactive to protect their hard-earned money.

The Importance of Investor Knowledge in the Share Market

Investing in the stock market or any financial instrument requires an understanding of market trends, company fundamentals, trading mechanisms, and regulatory frameworks. Lack of awareness can lead to misinformed decisions, leading to potential losses. Investors must educate themselves on:

Stock market dynamics – Understanding price movements, demand-supply factors, and economic influences.
Fundamental and technical analysis – Evaluating company financials, earnings reports, market positioning, and using charts to analyze stock trends.
Risk assessment – Differentiating between low-risk and high-risk investments, diversifying portfolios to mitigate losses.
Regulatory compliance – Knowing the guidelines set by regulatory authorities like the Securities and Exchange Board of India (SEBI) to avoid fraudulent schemes.
Lack of investor knowledge often leads to falling for get-rich-quick schemes, unregulated investments, or aggressive speculation that can wipe out an investor’s savings.

Technology Literacy and Its Role in Safe Investing

As online trading platforms, cryptocurrency exchanges, and algorithmic trading dominate modern investment landscapes, technological literacy is now a necessity. Investors must be familiar with:

Online trading platforms and their security measures – Ensuring platforms are SEBI-registered and equipped with multi-factor authentication (MFA).
Safe digital transactions – Avoiding unauthorized payment gateways, protecting sensitive financial data, and using secure networks for transactions.
Avoiding deepfake and AI-generated scams – Scammers use AI-generated content, fake investment tips, and fraudulent trading apps to deceive investors.
Recognizing phishing attempts – Fraudulent emails and websites that mimic official trading platforms can steal login credentials and financial data.

The Rising Threat of Cyber Fraud in Investment

With digital banking and online trading becoming the norm, cybercriminals have devised sophisticated fraud techniques to exploit investors. Common frauds include:

Ponzi and pyramid schemes – Fraudsters lure investors with promises of high returns, using funds from new investors to pay older ones.
Fake trading platforms – Many unregulated apps and websites pose as legitimate trading firms, stealing deposits.
Pump-and-dump scams – Fraudsters artificially inflate stock prices with false hype, then sell off shares at a profit, causing a crash.
SIM swap frauds – Cybercriminals gain access to investors’ trading accounts by cloning SIM cards linked to OTP verifications.
Robo-call and impersonation scams – Fraudsters impersonate stockbrokers or investment advisors, offering insider tips to trap investors into scams.
How Investors Can Protect Themselves from Scams and Frauds

To safeguard investments, investors should adopt a proactive and defensive approach by:

1. Verifying investment platforms – Always cross-check SEBI registration of brokers and investment firms.
2. Ignoring unrealistic returns – Any scheme promising abnormally high, risk-free returns is likely a scam.
3. Using strong cybersecurity measures – Enabling two-factor authentication (2FA), securing passwords, and avoiding suspicious emails.
4. Avoiding unauthorized advisors – Seeking certified financial advisors (CFAs) or registered wealth managers for investment guidance.
5. Regularly monitoring accounts – Frequently reviewing stock portfolios and transaction history for any unauthorized activities.
6. Attending investor awareness programs – SEBI, RBI, and stock exchanges like NSE and BSE conduct awareness drives to educate investors on safe trading practices.

In today’s evolving financial landscape, investor knowledge, technological literacy, and cybersecurity awareness are essential shields against fraud and financial ruin. While the stock market remains an excellent avenue for wealth generation, uninformed investing can lead to devastating financial losses. 

In an effort to enhance investor awareness and safeguard the interests of stakeholders in the securities market, the National Stock Exchange of India (NSE) and National Securities Depository Limited (NSDL), under the aeigis of the Securities and Exchange Board of India (SEBI), organized a Mega Regional Investor Seminar for Awareness (RISA) at the Gauhati Medical College Auditorium.

Titled “Viksit Bharat ka Viksit Niveshak”, the seminar aimed to educate participants on key aspects of the securities market, including investor rights and responsibilities, fraud prevention strategies, and smart investment practices. The event witnessed the esteemed presence of Ms. Aradhana Verma, General Manager, SEBI, as the Chief Guest.

Assam’s Rising Investment Landscape

Assam has emerged as a significant player in India’s investment sector, boasting a registered investor base of over 24.6 lakh individuals. Notably, 29.8% of Assam’s investors are women, making it the fifth-highest state in terms of female participation in the securities market. Investor participation in the state has witnessed substantial growth, rising from 0.7% in 2019 to 2.3% in 2024. The event underscored SEBI’s commitment to sustaining this upward trajectory by fostering education, transparency, and investor protection.

Comprehensive Investor Education and Fraud Awareness

The Mega RISA seminar provided a holistic approach to investor awareness, covering emerging market trends, fraud mitigation in the digital age, financial literacy, and informed investment decision-making. Engaging panel discussions explored key topics such as “The Future of the Securities Market – Trends, Challenges, and Opportunities” and “Let’s Deep Dive into DEMAT”. Experts from SEBI and leading financial institutions shed light on critical issues, including cybersecurity risks, unregulated investments, and the importance of dematerialization.

Participants were educated on identifying red flags in Ponzi schemes, unauthorized advisory services, and digital scams. To make financial literacy engaging, the event featured an interactive financial quiz and a Nukkad Natak, ensuring a broader outreach to investors of all backgrounds.

With an overwhelming response from investors, financial professionals, doctors, students, and market experts, the seminar reinforced Assam’s growing enthusiasm for the securities market. The initiative equipped participants with essential knowledge to make informed financial decisions and navigate the investment landscape with confidence.

NSE and NSDL: Pillars of India’s Financial Market Infrastructure

National Stock Exchange of India (NSE)

Established in 1994, NSE revolutionized India’s financial landscape as the first exchange to introduce electronic trading. Since 1995, it has consistently maintained its position as India’s largest stock exchange in terms of total and average daily equity share turnover, as per SEBI data. With an integrated model that includes exchange listings, trading services, clearing and settlement solutions, indices, market data feeds, technology solutions, and financial education, NSE plays a pivotal role in ensuring market compliance.

Globally, NSE holds the distinction of being the world’s largest derivatives exchange by trading volume, as per the Futures Industry Association (FIA) 2023 statistics. It also ranks third globally in the equity segment by the number of trades (electronic order book), as per the World Federation of Exchanges (WFE) 2023 report.

National Securities Depository Limited (NSDL)

As India’s first securities depository, NSDL has transformed the way investors hold and transfer securities in dematerialized form. NSDL’s reach extends across 99.3% of India’s pin codes, with an extensive network of 63,000+ service centers spanning all states and union territories as of FY 2023-24.

NSDL offers a suite of value-added services catering to investors and modern brokerage firms, including NSDL SPEEDe App, digital loan against securities (Digital LAS), FPI monitoring, and API-driven technology integrations. These innovations have positioned NSDL as a leader in financial technology and investor convenience.