Investing in stocks on Twitter, Telegram tips? Zerodha warns investors about ‘pump and dump’ scams

New Delhi: Do you invest in the stock market based on tips from social media platforms such as Telegram, Twitter or WhatsApp? If yes, then Zerodha has a special message for investors like you. The country’s largest brokerage firm, on Tuesday (April 20), took to Twitter to warn investors about stock tips on social media platforms.

In a tweet, Zerodha pointed out how swindlers use ‘pump and dump’ scams to make money. “Pump and dumps are one of the oldest scams in the stock market,” the brokerage firm said.  

Pump and dumps are one of the oldest scams in the stock market.

In a pump and dump, operators who hold most of the shares move the prices by spreading messages through SMS, social media and then dump the shares once the price rises. — Zerodha (@zerodhaonline) April 19, 2022

“In a pump and dump, operators who hold most of the shares move the prices by spreading messages through SMS, social media and then dump the shares once the price rises,” it explained. 

Zerodha noted that such operators are now taking to YouTube and Twitter to push the prices of stock in the north direction. “SMS, Telegram, & WhatsApp, were the most popular channels to spread these stock tips for a long time. But of late, people with large followings on social media and YouTube are being paid to promote stocks through tweets and videos,” it said. 

A lot of investors, unknowingly or driven by greed, fall for these tips. They jump in when they see a stock hitting upper circuits, but are stuck once the operators dump the stock. In pretty much all the cases, these stocks end up crashing 90%+ and become worthless. — Zerodha (@zerodhaonline) April 19, 2022

The company said that in the last few months alone, multiple such instances got media attention. However, there have been several cases that go unnoticed, Zerodha said in one of its tweets. 

“A lot of investors, unknowingly or driven by greed, fall for these tips. They jump in when they see a stock hitting upper circuits, but are stuck once the operators dump the stock. In pretty much all the cases, these stocks end up crashing 90%+ and become worthless,” Zerodha explained. 

The company also brought up that while there are 100s of downright scammy channels for every sensible one. “Ironically, the scammy ones tend to have the most subscribers,” it pointed out. Also Read: Retail inflation for farm, rural workers rises to 6.09%, 6.33% in March 2022

Finally, the company has also urged investors not to buy or sell stocks based on random tips on Twitter, YouTube, WhatsApp, etc. “You're investing your hard-earned money. There are no easy ways to get rich quick,” it said. Also Read: EPFO adds 14.12 lakh net subscribers in February 2022