Nearly 30 Indian retail investors have suffered losses exceeding ₹100 crore in a suspected trading scam involving Bengaluru-headquartered fintech platform Stockal Securities, Moneycontrol reported.
The accounts of users were allegedly accessed without authorisation, following which their US stock portfolios were liquidated.
Stockal Securities is registered with the Securities and Exchange Board of India (SEBI). It enables Indian investors to invest in US-listed stocks, exchange-traded funds (ETFs) and other foreign securities.
The incident took place on October 15, with investors claiming that their holdings in prominent US companies such as Apple, Tesla, Nvidia and Amazon were liquidated and the proceeds were used to purchase shares of Zhibao Technology Inc., a relatively thinly traded Chinese company listed in the US.
The preliminary loss estimate of over ₹100 crore is based on information shared by investors. However, the final extent of the financial losses is yet to be ascertained, the news organisation stated.
Who can be held responsible for the losses?
Legal responsibility may rest with the Indian fintech platform, its US brokerage partner, or both, depending on the party that controlled the security and transaction, Alay Razvi, Managing Partner at Accord Juris, told Livemint.
Stockal’s parent, Borderless, said in a statement that DriveWealth notified it of unauthorised trading activity in 13 customer accounts and that an unauthorised third party appears to have accessed 26 accounts using valid login credentials.
Though unauthorised trades occurred in 13 accounts, replacing large-cap holdings with thinly traded microcaps, no funds were withdrawn, it added. Stockal has also denied evidence of a platform breach and has attributed the incident to possible credential compromise or social engineering.
“Liability will ultimately depend upon the investor agreement, the Stockal and DriveWealth clearing agreement, security and monitoring obligations, indemnity provisions, choice of law and arbitration clauses, and forensic evidence establishing which party controlled or could reasonably have prevented the transactions,” the expert explained.
Can affected investor seek compensation?
Claims against the Indian intermediary can likely be pursued before Indian courts and regulatory authorities where the services were marketed, provided and consumed in India, said Apurva Kanvinde, Partner at Juris Corp.
“Investors may argue that failures in account security, fraud detection or transaction monitoring constitute a deficiency in service and seek compensation,” Kanvinde added. The amount investors may recover will depend on the findings of the investigation and the parties found responsible.
How can investors file a complaint?
Those affected by the Stockal Securities scam, or any future trading scam involving a SEBI-registered platform, should first raise a complaint with the intermediary. If the grievance remains unresolved, they can escalate it to SEBI through its SCORES portal, Razvi advised.
They may also use SEBI’s SMART ODR mechanism for conciliation or arbitration. SEBI is the principal Indian securities regulator for complaints against Stockal, which is reported to be SEBI registered, he added.
Investors may also approach the relevant stock exchange grievance mechanism, lodge police or cybercrime complaints, and pursue civil remedies.
“The US SEC may examine DriveWealth’s conduct but does not ordinarily provide direct compensation to Indian investors,” he noted.
