Indian Investors Allege ₹100 Crore Losses in Stockal Scam After Unauthorized US Stock Sales

Nearly 30 Indian retail investors have reportedly lost over ₹100 crore in a suspected trading scam involving Bengaluru-headquartered fintech platform Stockal Securities, according to Moneycontrol. Investors allege their US stock portfolios were liquidated without authorization on October 15, with the proceeds then channelled into concentrated positions in thinly traded Chinese securities, resulting in substantial losses.

Stockal Securities, a Bengaluru-based fintech registered with Sebi, facilitates Indian retail investors' access to US stocks, ETFs, and other overseas securities. It operates an India-facing application for funding and tracking, while partnering with US-based clearing brokers like DriveWealth LLC for trade execution and asset custody. One affected investor, a senior official at an Indian beverage company, reported that 10 of his major US stock holdings, including Apple, Tesla, Amazon, and Alphabet, valued at $335,768, were sold without consent. The funds were then used to purchase 300,000 shares of Chinese company Zhibao Technology Inc. at an average price of $1.05 per share, leading to losses of approximately $450,000, or ₹4.26 crore.

The investor noted the absence of individual trade confirmations or warnings for the mass liquidation and subsequent purchase, contrasting with normal emails for authorized transactions. Stockal's parent entity, Borderless, contacted him on October 18, acknowledging suspicious activity on October 15, and DriveWealth subsequently restricted the account. The investor has filed complaints with both Sebi and the US Securities and Exchange Commission (SEC). Stockal, in response to Moneycontrol, stated that the circumstances are under investigation, with preliminary assessments suggesting the customer's email and credentials might have been compromised through social engineering or phishing, asserting no evidence of a breach of the Borderless/Stockal platform itself. The precise identity of those who accessed the accounts remains unclear.

Another anonymous investor alleged that $3.1 million, or approximately ₹29 crore, in securities were sold without authorization through Stockal on October 15. The entire portfolio was liquidated within two minutes, with the proceeds used to acquire 30.5 lakh shares of a thinly traded stock within 15 minutes, without any holds, alerts, or verification. This investor's account has not been restored, nor have the losses been reimbursed. An FIR has been registered in Bengaluru, though HDFC Securities was not named as an accused.

DriveWealth, in a letter dated October 30 to one affected investor, denied responsibility, stating, "The unauthorized third-party access to your account occurred in your interface with Stockal; any security lapses related to that platform are owned by Stockal. The unauthorized activity did not initiate at DriveWealth." DriveWealth claimed Stockal's instructions to freeze the account prevented it from taking further corrective action, despite concerns about the investor's continued exposure to the unauthorized positions. They further alleged that some initial corrective measures to reduce exposure were paused following explicit instructions from Stockal.

What to watch: The outcomes of the regulatory investigations by Sebi and the US SEC, and further clarity on liability between Stockal and DriveWealth.

Editor's note: The article effectively synthesizes the detailed reports of the alleged scam, including the conflicts between Stockal and DriveWealth, using the provided text.