In today’s Finshots, we tell you how the capital market regulator, the Securities and Exchange Board of India, went after a YouTube influencer who’s allegedly been defrauding gullible people.

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The Story

Flashing lights. Pulsating music. An announcer urging the crowd to applaud loudly. And then, the grand entrance — a man in a suit, surrounded by bodyguards, walks down the hall towards the grand stage. His arms are outstretched to ‘knock palms’ with the people in the audience.

Mohammad Nasiruddin Ansari aka Baap of Chart (BOC), a YouTube Finfluencer, had arrived. And he was going to ‘educate’ people on how to trade stocks and become rich!

We’re not making this up. There’s an actual video of this event.

Now the problem with this kind of flashy stuff is that it puts you in the spotlight. People notice. People talk. And since you’re out there claiming ‘trading and investing expertise’, the videos land up on the regulator’s desk too. In this case, SEBI’s radar. And then, the house of cards might just begin to fall.

See, SEBI has one big rule for folks in the investment world — don’t tell others what stocks they should buy or sell if you don’t have a licence. It’s as simple as that. If you flout this, you’re a goner. Now they do make some exceptions. For instance, if you decide to talk about stocks, trading, and mutual funds, in newspapers or on a media platform such as YouTube “which is widely available to the public”, that’s fine. SEBI might give it a pass. You simply can’t give advice one-on-one.

Naturally, when SEBI got wind of BOC’s antics, they had to check — Is Nasir doling out investment advice in the garb of education? Is he flouting the investment advisor rules?

So they asked Nasir, “What’s this business you do exactly?”

And he replied, “Well, I simply coach people. I don’t tell them what to buy or sell. I don’t tell them when to buy or sell”

Okay. That’s fine. But was it true?

SEBI says no.

According to them the modus operandi was straightforward. First, Nasir and his team created an aura that the Baap of Chart was a Futures & Options (F&O) trading wizard. Then they could sell people his courses with the claim that they’d be able to replicate his success and pocket a hefty fee for that. But then, they’d create a private group for those who signed up. This is where the buy and sell recommendations would happen. They’d charge a fee for that too. Some of the fee was charged upfront. Some of it as a profit-share. And SEBI got WhatsApp screenshots to prove it.

The bottom line was that SEBI found BOC and a related firm called Golden Syndicate made a cool ₹17 crores by essentially posing as an investment advisor.

That was enough. BOC was going down.

But wait…there’s more. Because when we told you there’s one big rule, we forgot to mention there’s one big sub-rule too — Don’t promise guaranteed returns. Stock markets are random and if you think you can promise a certain return, you’re lying.

And what did Nasir and BOC do?

They promised returns, of course! Here’s something from a WhatsApp chat (edited for clarity) —

“Loss Recovery Strategy. Minimum capital should be ₹3 lakhs to ₹10 lakhs. Every month, profit is possible: minimum ₹3 lakhs to ₹6 lakhs and on expiry day minimum ₹5 lakhs. Maximum risk ₹30,000 to ₹40,000.”

Yeah, you just can’t say things like that. Even if you have an “Investment Advisor” licence!

But that’s not even the worst part. And I promise this will blow your mind.

Now SEBI wanted to see for itself how great Nasir’s strategy was. I mean, if he was claiming sure-shot returns of 20–30% every month, he must’ve been swimming in cash himself, right? He would be beating the market hands down and might be the greatest trader to have ever lived in India!

But, the reality was starkly different. He’d actually lost a staggering ₹3 crores in his personal accounts. Yup, SEBI pulled out the full ledger of his trades between January 2021 and July 2023 and that’s the number they got. Nasir’s strategies were all a scam. His ‘sureshot’ strategies seemed to be a sure way to actually lose money. And in reality, he was pulling the wool over people’s eyes and using their money to fund his own losses.

And that folks is why SEBI, in an interim order, has asked BOC to pay back the ₹17 crores and suspended them from trading activity till further notice.

But hey, this isn’t the first time a “finfluencer” has been found guilty of offering fee-based advice without a licence. A few months ago, SEBI asked another popular trader PR Sundar to return the ₹6 crores he charged his clients.

So why do people keep falling for this? Even after SEBI’s research proves that 9 out of 10 traders who dabble in the F&O market lose money. Why do it?

Well, one reason could be the glitter of quick money.

For instance, let’s assume that the Nifty 50 index is trading at 19,000. The market has been on a tear and you read everywhere that experts believe that it will head higher. So you buy something called a ‘Call Option’. Without getting into the technicalities, how this works is that you first pay a premium. If the market heads north, you can cash out and pocket the gain. If the market falls, you’ll only lose the premium. So you buy 1 lot of Nifty shares. The options market works in lots and each Nifty lot has 50 shares. Anyway, you check the premium and it shows ₹200. Now the total premium you shell out will be just ₹10,000 (200*50). But, you get leverage. The overall value of this contract you’ve bought is actually ₹9,50,000 (19,000*50).

Now imagine the Nifty shoots up to 19,500 within a week. The actually value of the contract is suddenly ₹9,75,000. Sell the option and you could pocket a sweet ₹25,000 in just a week. And you only paid a premium of ₹10,000 in the first place.

That sure seems quite lucrative, doesn’t it?

So yeah, you might see that SEBI stat saying 9 out of 10 people lose money doing this. People might keep losing their ₹10,000 premiums over and over again. But you think, “Why can’t I be the 1 person who makes money?” And then you come across videos where a trading ‘expert’ claims sure shot profits and you get sucked right in. Especially when the so-called expert says that he guarantees you can earn more profit than your salary with his strategies. And that if you lose money, you can “slap him during the [trading] workshop.”

Yup, slap him. That’s what Nasir said.

So can you blame the folks who believed him?

Now, some brokerages like Zerodha* have tried to fix the problem to some degree. They realized that these finfluencers often posted fake screenshots of their trading accounts to bait victims. So they introduced “Verified P&L [Profit and Loss].

Granted just having a ‘verified’ badge won't always cut it. People could still doctor videos and screenshots and include the badge. So, to circumvent this issue, Zerodha created a link to the P&L instead. And generating the P&L would be in Zerodha’s hands. That means, instead of screenshots that can be doctored, genuine traders could share a ‘link’ to their P&L. People could trust this more readily.

So this way, if people had decided to ask Nasir to share his “Verified P&L” (from Jan ’21 to July ‘23), they might have seen the reality — The reality of the nearly ₹3 crores of losses this ‘trading wizard’ had made.

Until then…

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*Zerodha, through its Rainmatter Fund, is an investor in Finshots.

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