Stockal investors allege unauthorised sale of US stocks worth millions
Nearly 30 Indian investors allege that their Stockal accounts were accessed without authorisation, leading to the sale of their US blue-chip holdings and purchases of a little-known stock that subsequently plunged nearly 60%.
Nearly 30 Indian investors utilizing the US share-trading platform Stockal Securities have accused the company of unauthorized access to their accounts. These investors claim their substantial blue-chip holdings, collectively worth millions of dollars, were illicitly sold and replaced with shares in an obscure company, Zhibao Technology Inc., which later plummeted by nearly 60% in value.
The culprits allegedly pocketed the proceeds from these forced sales to purchase ZBAO shares, with one senior investor losing around $335,768, which translated to 300,000 ZBAO shares at a price of $1.05 each. The shares' subsequent drop to $0.42 resulted in significant losses for the investor, estimated at Rs 4.26 crore. This alarming incident has raised concerns among investors about the potential use of coordinated buying tactics in multiple accounts, which could artificially inflate the price of a thinly traded stock—a common strategy in pump-and-dump schemes.
However, the claims do not conclusively identify who, if anyone, benefited from these trades. Stockal Securities alleges that unauthorized individuals gained access to 26 accounts using valid login credentials, attributing the breaches to phishing attacks that compromised customers' login details through deception. In contrast, DriveWealth, the US brokerage partner that holds the accounts, disputes this explanation, blaming security weaknesses at Stockal.
The affected investors have filed complaints with the Securities and Exchange Board of India, the US Securities and Exchange Commission (SEC), and the Bengaluru police. The ongoing disagreement between the two companies regarding the cause of the breaches has left investors uncertain about the responsibility for their losses. This case also underscores the risks associated with Indian investors trading in overseas markets through intermediary platforms.
When a trade is executed through an Indian app but settled by a US brokerage, questions arise regarding the extent of investor protection, the division of responsibilities among the involved companies, and which regulatory body has jurisdiction to address grievances.
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