D-Street Diary: Fake portfolio screenshot scam on Twitter, Telegram; what SEBI, brokers can do to curb it

'Behind every great fortune lies a great crime’ Balzac famously said. A stock market adaption of that quote could be: ‘In every great bull market flourishes a big con game.’ Brokers siphoning off bank funds is passé, promoters manipulating their own stocks is by now par for the course, as is window dressing of accounts to boost earnings.

Self-proclaimed market gurus sharing (fake) portfolios/ trading positions on social media platforms to sell subscription services or technical analysis/derivative trading workshops to gullible investors is the side game of this bull market; a game that has been going on for a while now. The target audience is the growing tribe of individual investors stampeding into the stock market, mesmerised by the near-one-sided rally in share prices over the last 18 months.

The retail frenzy in the market is evident from the steep rise in the number of Demat accounts, trading accounts at broking firms, mutual fund folios and the money coming in through systematic investment plans (SIPs) every month.

The problem of fake screenshots is most common on Twitter and Telegram, the two platforms that have become a hub for stock-trading discussions.

Most of these investors are first-timers, having little or no knowledge about how the stock market works. These so-called gurus, or fraudsters, for want of a better word, pose as veteran traders and post screenshots of purporting to be their current or recent stock portfolio/positions on social media platforms.

The screenshots are typically edited in Photoshop to show bogus profits the trader never made in the first place.

The bait is used to trap gullible first-time traders who are asked to pony up a subscription fee to join private WhatsApp or Telegram groups where they will receive stock recommendations. The fees range from a few thousand a months to tens of thousands for a year’s service. Many such private groups have thousands of paying members.

Alternatively, the newcomers will be persuaded to sign up for workshops that promise to make them experts in technical analysis or options trading in a matter of few days or a few weeks. These workshops too charge anywhere between a few thousand to few tens of thousands.

The con started small, Twitter handles and Telegram groups started by posting fake MTM screenshots to establish their credentials in stock trading. They also made claims about their accuracy (typically 100 percent) and how their paying subscribers have benefited from their calls. The fraudsters then graduated from fake screenshots to making videos to promote their claims. The videos depicting fake profits are edited in either a video-editing software or simply through changing the values of an HTML-based portfolio window of a broker’s page, as can be seen below.

The people who run subscription products based on such claims are not registered with SEBI as registered investment analysts (RIA). Occasionally, market regulator SEBI bans individuals and firms for making stock recommendations on the Internet despite not being registered as RIAs. But with such groups mushrooming by the thousands, it is not clear if the regulator has the manpower to tackle the problem.

Since the fraud relies on the rather simple trick of manipulating values on the holdings page, brokers can consider introducing an optional QR code on such pages. The QR code will contain an embedded link to a page hosted on the broker’s website, which will show the actual stored values when the portfolio page (along with the QR code) was first loaded. Brokers can cache a copy of the user’s portfolio/holdings page every time they serve it to them through the website/app. Scanning the QR code will thus allow anyone to corroborate values that are being claimed to exist on the page.

Users must be notified that by sharing screenshots, they have themselves given up the right to the privacy of their portfolio data. And that the QR code simply serves as a verification tool.

Besides, if turning on the QR code is kept an optional feature, users who wish to show off their genuine profits will be incentivized to turn it on while those that don’t may have something to hide!