Merchant navy sailor in Kasaragod loses Rs 2 cr in online trading scam

Kasaragod: A 37-year-old merchant navy sailor lost nearly Rs 2 crore after "buying" stocks on a fake stock trading app between June 2 and July 5. Cybercrime investigators said it is one of the biggest online frauds reported in Kasaragod district.

The loss of money and face almost drove the sailor, a father of two, to end his life but his relatives pulled him back from the brink. "I not only used my own money but broke my mother's FDs, pawned the jewellery of my aunts, borrowed from cousins and friends, and pledged my property without telling them why," Prabhas KB (name changed) told Onmanorama. He also borrowed money from "blade", a local term for cut-throat moneylenders.

After he realised he had fallen prey to an elaborate trading scam, Prabhas turned off his mobile phone and left home. His relatives had to approach the police with a missing person complaint to find him. "More than a trading app, it was a blackmailing app. I just wanted to exit with at least the money I invested but they would not allow it unless I put in more money. I went mad," he said.

The professor
Prabhas lost Rs 1,94,42,603 in around 20 transactions in a fake app called Gem VG, which mimicked genuine trading apps with live data on NSE's Nifty 50 and BSE Sensex, IPO calendar, information on listed companies and market news. The app had options to buy stocks and withdraw, a button he later realised was a mirage.

Prabhas was new to stock trading and joined an "advisory group" on WhatsApp. He would get tips on which stocks to buy, how long to hold and when to sell them. "I made around Rs 10,000 following their instructions," he said. The advisors would ask for up to 40 per cent of his profit and Prabhas did not mind paying because he was making money and learning, too. He was hooked.

After a couple of weeks, someone added him to another WhatsApp group called 'Gemway VIP'. "Everyone was praising one 'professor' whose advice helped them make big money," said Prabhas.

He keenly observed the chatterbox group making big money. After a week, a manager of 'Gemway VIP' asked him not to watch from the sidelines and take the plunge.

When Prabhas googled, he found 'Gemway Assets', which was a French asset management company. The manager who went by the name "Vasath Palanisamy" told him that Gemway ventured into India two months ago, with an office at the Mafatlal Centre at Mumbai's Nariman Point. Prabhas could find the commercial building. He was sent the link to download the app.

The heist
The app turned out to be Gem VG. Contrary to the market regulator Securities and Exchange Board of India's (SEBI) norms, the app did not require a Demat account to electronically hold the shares bought from the trading up. "I had doubts but a lot of people in the group were talking of making profits, buying cars and going to the UK, and praising the professor who went by the name Raneet Sadh," he said.

Prabhas checked the profile pictures of others in the group and found them to be "high-class people in suits".

But when Prabhas decided to make his first buy for Rs 1 lakh, he saw a bank account with IFSC pop up on the screen when he entered a passcode. "I realised the app did not have a wallet and the money was going to an outside bank account," he said.

Nevertheless, he made the payment and saw a profit of Rs 20,000 in his portfolio. The next investment of Rs 1 lakh saw his profit burgeon to Rs 4 lakh. He pumped in Rs 10 lakh and saw his profit surge to Rs 3 crore on the app. He was sending money to various bank accounts in Tamil Nadu, Rajasthan and West Bengal.

He was told that he was getting the shares at a much cheaper price than listed on the stock market. For example, the price band for Vraj Iron and Steel's initial public offer (IPO) was Rs 195 to Rs 207. The bid started on June 26 and closed on June 28. The shares were listed at Rs 254. But Prabhas was sold the shares for Rs 68. He was told that the Gem VG brokers bought the shares in the grey market. This explains the illusory profit on the app.

At Rs 3 crore, he wanted to withdraw the money to repay his cousins and friends. That was when he faced resistance. "The manager said I was doing good and hang on for some more time and I can give back my cousins double the money I borrowed from them," he said. If needed, speak to the professor, the manager told Prabhas.

He then raised more money and invested Rs 50 lakh in the app and his profit increased to Rs 12 crore. This time, he insisted on exiting and the app manager allowed him to withdraw the money. "But when I entered the passcode and pressed the withdraw button, it turned to buy and my Rs 12 crore disappeared from my app wallet," Prabhas said.

The fraudsters blamed Prabhas for not paying attention while doing the transaction and asked him to make more investments to see the profit from the purchase he just made.

Prabhas has already been caught in the sunk cost fallacy, a 'thinking trap' where people, instead of cutting their losses, continue investing in a loss-making project because they had already put time, money, or effort into it. “I did not have a choice. They said if I did not invest more, my trading account would be frozen and I would lose all my money," he said.

After investing Rs 1.94 crore, his profit showed a whopping Rs 131 crore. "When I wanted to withdraw the money, I was told to pay 10 per cent of it. How will I raise Rs 13 crore? I begged them to return the Rs 2 crore I invested and allow me to exit. But they consoled me saying I have become a partner of Gem VG by investing that much money and gave me time till Friday to raise Rs 13 crore," Prabhas said.

By then, Prabhas was broken, mentally and financially. The previously chatty WhatsApp group also became muted. His relatives found him and dragged him to Bekal Police Station. Bekal Police registered an FIR for cheating under Section 420 of the IPC, Section 318 (4) of Bharatiya Nyaya Sanhita and Section Section 66 D of the IT Act.