SEBI conducts searches in Telegram stock tips scam

India's capital market regulator has carried out search and seizure operations in various cities across the country as part of its efforts to unearth social media stock tips fraud.

The Securities and Exchange Board of India (SEBI) on Thursday raided premises of seven individuals and one corporate entity at multiple locations in Ahmedabad and Bhavnagar in Gujarat, Neemuch in Madhya Pradesh, Delhi, and Mumbai.

This crackdown comes after SEBI received information that messages containing stock tips and other investment advice for selected listed companies are being widely circulated through websites and social media platforms such as Telegram, Facebook, WhatsApp, Instagram etc.

Perpetrators of such fraud use various marketing techniques to attract subscribers on their social media channels.

Officials of the market watchdog seized various records and documents including 34 mobile phones, 6 laptops, 4 desktops, and 4 tablets among others from the custody of these persons.

These entities, according to SEBI, are operating nine Telegram channels with more than five million subscribers to whom they were making recommendations on select listed stocks. Their suggestions induced investors to deal in such scrips, thereby creating artificial volume and price rise, SEBI said.

This provided an opportunity to their linked entities to offload their shares at higher prices and make significant profits at the cost of unsuspecting retail investors. The data, emails and other documents, are being retrieved from the seized devices and a detailed investigation is in progress, the market regulator said.

In the past, SEBI had cautioned about Bulk SMS frauds where investors were induced to invest in stocks of certain listed companies. SEBI had also collaborated with the Telecom Regulatory Authority of India (TRAI) to reduce the vulnerability of the securities market to manipulation through misuse of services like Bulk SMS.

However, the perpetrators of such frauds are now adopting new methods and technologies to defraud the investors.

In December 2021, SEBI officials conducted a search and seizure operation on persons carrying out similar manipulative activities through Telegram channels. Admins of these channels had built substantial positions in these scrips prior to the circulation of recommendations and offloaded their positions soon after the rise in price of these scrips, making significant profits at the expense of gullible investors.