Penny stocks can be used to defraud investors: Zerodha's Nithin Kamath
Premium- ‘Artificial losses can be created using illiquid options or penny stocks to move money out,’ the Bengaluru-based billionaire said
Nithin Kamath, the co-founder and Chief Executive Officer (CEO) of Zerodha, on Monday warned demat account holders against sharing their login details with others.
“One common way investors get defrauded is by sharing their login details with others," the CEO of the brokerage firm said.
Kamath added that fraudsters can create artificial losses with the help of penny stocks. “Artificial losses can be created using illiquid options or penny stocks to move money out," he said, adding, “Just like you don't share your bank logins, you shouldn't share your trading account logins as well."
The Bengaluru-based billionaire also said that the other way accounts get compromised is through phishing frauds.
“It's Important to not enter login details anywhere apart from the official broker websites and apps," he noted.
Kamath said that his team has dealt with a bunch of frauds where unregulated advisors promise phenomenal returns to lure investors.
Sharing the large issues spotted by them, he said, “Unregulated advisors promise phenomenal returns to lure investors. In many cases, they share their account access with strangers on WhatsApp and telegram."
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Kamath said, “The email gets phished first, where a lot of customers store all login credentials to bank and trading accounts."
He further said, “Most people don’t have 2FA on their email accounts, which further increases the risk of getting phished."