‘Ponzi App’ alert

Only you can save yourself from getting duped through these unregulated apps run clandestinely by the cyber fraudsters
"If reports about loss of money in such frauds are taken into account, billions of dollars across the globe are lost by the gullible investors every year." [Representational Image]
"If reports about loss of money in such frauds are taken into account, billions of dollars across the globe are lost by the gullible investors every year." [Representational Image] File: Pixabay

On Sunday, Finance Minister Nirmala Sitharaman, while cautioning people against “Ponzi apps" revealed that the finance ministry was working with the Ministry of Electronics and Information Technology (MeitY) and the Reserve Bank of India (RBI) to clamp down on such apps “like never before." On so-called finfluencers, she said the government did not have a regulatory proposal under consideration, but advised investors to tread carefully and verify what they’re getting into before putting in money.

Her piece of advice to the gullible investors is worth reproducing. “Don’t go as a flock into something, where because somebody else has done it, you also do it, without doing your due diligence," she said, “We have to be careful, it’s our hard-worked money. You’ve earned it, you’ve saved it, you protect it."

Actually, in a world of complex and glittering financial products, fraud alerts have become a common phenomenon.

Almost every day we find such alerts for the general public in the media and simultaneously we also come across incidents of frauds committed online by cyber fraudsters. We commonly find people falling prey to online frauds either for being greedy or succumbing to the fear created by fraudsters.

Despite high alerts against cyber frauds, people continue to fall in the trap of fraudsters and are lured to invest money in financial schemes they do not understand. Ultimately, they end-up losing their hard-earned money to a variety of frauds.

Over a period of time, if advanced technology has revolutionised financial transactions at lightning speed across global geographies, it has also armed cyber fraudsters with varied opportunities to upgrade their modus operandi in line with the innovations in technology.

In fact, online financial frauds have become an organized sector which is only growing in size with its operators mostly remaining untraced. If reports about loss of money in such frauds are taken into account, billions of dollars across the globe are lost by the gullible investors every year.

Among various modus operandi adopted by the fraudsters to rob people of their hard earned money is the Ponzi trap. Ponzi scheme is an old generation scheme which has been used to dupe people in the name of high returns and thousands of investors across the country are battling for decades to get their money back after the scheme was found fraudulent. With the advent of technology, the Ponzi scheme has got a new facelift as the fraudsters have placed the scheme on the technology platform. In fact, the fraudsters are using the advanced technology not only to remain unidentified but also expand their operations across the globe. The Ponzi scheme drivers have lost no time to take advantage of the App culture and have floated Investment Apps to lure gullible investors with high returns and bonuses.

To understand a Ponzi scheme, one has to understand that it has no real business where money is invested to reap benefits and pass it on to the investors. The modus operandi is that the money collected from new investors is typically used to pay off old ones, a process that can go on for years till inflows dry up and it falls apart. In other words, a Ponzi scheme is a fraudulent investing scam promising high rates of return at little to no risk to investors. The scheme generates returns for early investors by acquiring new investors. These schemes usually collapse on themselves when the chain of investors breaks and new investments stop.         

Some time back, I came across a Crypto App owned by a US-based company promising their investors daily and monthly returns, that too higher than the prevailing interest rates.

On the face of it, the offer was lucrative as the returns were quick. While peeping into the features of the App and its performance vis-à-vis investors’ confidence, I found investors from Mumbai (Known as financial capital of the country), Gujarat, Uttar Pradesh and other states of India banking upon the App for investment.

Interestingly, the firm had opened a separate social media group of its Indian investors. One of the unique offers included a bonus of US$200 to those who got more people to invest in the app. There were also some comments of its investors who had shared their profit-making experience by investing in the App.

Most of the investors had vouched that the firm was delivering as per its promise of quick returns, and most of them revealed that they even invested the profit in the App to multiply their earnings.

However, after some time, I came across disturbing reports of its investors who were unable to withdraw their money through this Crypto App as the withdrawal option had vanished. Even as the investors approached the police, the fact remains that it was greed that attracted them to investment through this Crypto App which had no regulatory backing.         

Nowadays, it’s common to come across such unregulated Ponzi schemes duping investors of their hard earned money. The campaign against such fraudulent schemes has failed to alert people as the fraudsters skillfully decorate the scheme offerings to tame the investors into their fold.

Now a word about finfluencers. It’s a breed of ‘professionals’ that has emerged on the scene where they sell their stock market tips on social media platforms. Be it Facebook, Instagram or any other social media platform, we come across innumerable links teaching how to analyze company’s financials and invest in the stock market. Usually you will find them discussing stock market movement on a regular basis and their target audience is mostly the raw investors, who are basically first-time investors in the stock market, from small towns and rural areas.

Never take any 'advice' on social media at face value. There’s a lot of information out there. And lots of influencers promising overnight riches, crypto scams, copycat fake accounts, and MLM schemes. These can be difficult to spot when people who seem credible are urging their followers to get involved. And don’t trust anyone promising you a ‘get rich quick’ scheme.

While taking serious note of an exponential rise in the number of unregistered financial advisors, offering stock tips on social media platforms, the Securities and Exchange Board of India (Sebi) has said it is working on a set of guidelines for financial influencers, or finfluencers, giving unsolicited financial advice on social media platforms.

The guidelines are also going to cover the act of companies approaching these influencers, with considerable following on Instagram, Twitter and Facebook, to endorse their stocks.

Lastly, let me reiterate, if anyone promises high investment returns of more than the existing interest rate scenario, then be very careful. Don’t be in a dilemma, to be or not to be. Simply, stay away from financial schemes you do not understand. It is always better to avoid any unregulated 'investment' scheme that offers higher returns than the prevailing interest rate scenario.

And remember, social media is turning out to be a more dangerous place where the footprint of cyber criminals is huge. So, keep a safe distance from social media and messages from strangers or people pretending to be known to you.

They may offer you a ‘quick’ way out to ‘profits and prosperity’, but there is every possibility that you would be robbed of your hard earned money despite getting some profits at the early stage of your investment. Precisely, only you can save yourself from getting duped through the Ponzi Apps run clandestinely by the cyber fraudsters.

(The views are of the author & not the institution he works for)

DISCLAIMER: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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