Online brokerage platform Zerodha’s co-founder and Chief Executive Officer, Nithin Kamath, cautioned investors via a social media post on platform X on Saturday, December 7, about the most certain way to lose money in the markets. The post highlighted two recent scams in which the Securities and Exchanges Board of India (SEBI) passed an order.
Kamath focused on investors’ choices and said that if something is too good to be true, it usually is. He also said that taking shortcuts is the most certain way to lose money in the financial markets.
“If something is too good to be true, it almost always is. Taking shortcuts to make a quick buck is the surest way to lose money in the markets,” said Nithin Kamath, highlighting an old saying that cautions investors against scams.
What were the two scams?
Along with his take on the issue, Kamath also shared Zerodha’s Daily Brief link with his audience, explaining the two scams SEBI recently passed an order on.
Mint reported earlier that the securities market regulator, on December 3, cancelled the listing of Trafiksol ITS Technologies Ltd after investigations and ordered the company to refund ₹45 crore of investor money within one week. SEBI also instructed the Bombay Stock Exchange (BSE) to oversee the refund process.
The concerns were raised against the third-party vendor (Trafiksol), which was supposed to supply the integrated command control centre software (IC) to the company for ₹17.7 crore, a crucial technology for running smart cities that are typically imported from international vendors.
The investigations revealed that Trafiksol, the third-party provider, is a “shell company.” Fraudulent documentations were submitted by a ‘questionable TPV’ to justify the ₹17.7 crore earmarked for software procurement in its draft prospectus.
The company failed to provide a single credible justification for engaging such an entity in the first place, as per the earlier report.
Another financial scam was carried out by a financial influencer or finfluencer named “Baap of Chart”, who promised investors sky-high returns. According to the SEBI investigation, the individual was running an unauthorized investment advisory service and collecting huge sums of money from investors.
Offering investment advice hidden in “educational courses” on stock market trading, Baap of Chart and his team provided direct buy or sell stock recommendations to their clients in exchange for a fee. Over some time, the individual and his associates gathered ₹17.2 crore in fees.
After months of investigation into the issue, the securities market regulator banned him from the stock market for a year and ordered him to refund ₹17.2 crore collected via fees from clients, along with monetary penalties.
“If someone promises “guaranteed” stock market returns, run the other way. As SEBI tightens its grip on these so-called financial influencers, it’s a reminder to always verify credentials and think twice before following the hype,” said Zerodha in its Daily Brief post on December 5.
