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Unsolicited stock tips: Here's how gullible investors fall for 'pump and dump' scams, warns Zerodha

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In its blog post, Zerodha illustrated the charts of Agrophos, 7NR Retail, and Mauria Udyog — three stocks for which reportedly fraudulent messages were circulated in recent weeks.

Unsolicited stock tips: Here's how gullible investors fall for 'pump and dump' scams, warns Zerodha
Zerodha, India’s biggest stock broker, has cautioned investors against “pump and dump” scams, asking them to not invest or trade based on anonymous and fraudulent stock tips.
Here is how the scam works, according to Zerodha. Operators pick illiquid stocks tyat typically don’t trade actively. They start sending out a series of SMS, Telegram, and WhatsApp messages order to boost the stock price. And when the price keeps rsing, these fraudsters, who would be holding these stocks, keep offloading them in large quantities.
A key modus operandi of these frauds is to impersonate Zerodha with various spelling variations such as “ZRODHA”, “ZERDHA” etc, the company said in a blog post on January 8.
"As the price keeps going up, these operators keep offloading the stocks in large quantities. And these stocks start hitting lower circuits for months together leaving investors trapped," it said.
Zerodha illustrated the charts of Agrophos, 7NR Retail, and Mauria Udyog — three stocks for which reportedly fraudulent messages were circulated — urging investors to "stay away" from these stocks with "dubious fundamentals at best."
A gullible and unsuspecting investor is trapped as "these stocks hit lower circuits right at the market open, in which case it is not possible to exit," the company said.
A pertinent question remains "How do these tipsters get the contact details?" The leakage of phone numbers can take place at any level, says the broker, from opening a demat account with any broker to KYC agencies to service providers' level.
Zerodha also urged investors to report fraudulent messages to authorities, particularly market regulator Sebi or exchanges.
Investors receiving such unsolicited stock tips can report these numbers to the Telecom Regulatory Authority of India (Trai) as well as can file a complaint with SEBI SCORES, the company said. Additionally, investors can report the messages to the BSE and NSE exchange tiplines, it added.
Founded in 2010, Zerodha is the largest retail stock broker in India by active client base and reportedly contributes upwards of 2 percent of daily retail volumes across Indian stock exchanges.
Zerodha Kite reportedly has a client base of 9 lakh customers.
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