- Nearly 30 Indian investors lost over Rs 100 crore after unauthorized stock sales on Stockal Securities
- Blue-chip US stocks were sold and replaced with shares of thinly traded Chinese firm Zhibao Technology Inc
- Zhibao shares plunged 60%, closing at $0.42 versus an average purchase price of $1.05
Nearly 30 Indian stock market investors have reportedly lost over Rs 100 crore after their US stock portfolios were liquidated without the required authorisation on fintech platform Stockal Securities. Those proceeds were then used to buy shares of a thinly traded Chinese company, according to a Moneycontrol report. The transactions allegedly took place on Oct 15, when a couple of investors claimed their holdings in blue-chip US stock darlings, including Apple, Nvidia, Amazon, Tesla, Alphabet and AMD, were sold and replaced with shares of Zhibao Technology Inc. (NASDAQ: ZBAO).
The shares of Zhibao subsequently plunged around 60%, closing at $0.42 on October 23, against an average purchase price of $1.05 cited by one affected investor to Moneycontrol.
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Moneycontrol reported that the preliminary estimate of losses exceeding Rs 100 crore was based on information provided by two investors. The total losses across all affected accounts could be higher, but the overall figure has not been established.
One investor told Moneycontrol that 10 of his US stock holdings were sold for $335,768, and the entire amount was then redirected to purchasing 300,000 shares of Zhibao. He estimated his losses at around $450,000 (Rs 4.26 crore), and said he had filed complaints with SEBI and the US SEC. Another investor alleged that stock holdings worth $3.1 million (Rs 29 crore) were sold without their authorisation. The investor claimed that 30.5 lakh shares of Zhibao were then purchased within 15 minutes, without verification. The investor has also filed an FIR in Bengaluru, naming Stockal, its parent entities, US brokerage partner DriveWealth and HDFC Securities, among others in its report.
Blame-Game
Stockal told Moneycontrol in a statement that the circumstances surrounding the 'activity' were under investigation. The platform also said the affected customer's email account and credentials may have been compromised through phishing or a similar social engineering scam. It said that its own review had not found evidence of a breach of the Stockal platform.
On the other hand, DriveWealth, in an Oct 30 letter to an affected investor, disputed the responsibility saying the unauthorised access occurred through the investor's interface with Stockal and that any related security lapses belonged to the Indian platform, and not to DriveWealth's.
DriveWealth also alleged that Stockal had instructed it to freeze affected accounts and had paused certain corrective actions. It said it had repeatedly raised concerns about the continued market exposure of the unauthorised positions.
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