Zerodha founder and CEO Nithin Kamath has drawn attention to a fresh Enforcement Directorate (ED) action against an alleged WhatsApp-driven stock manipulation racket, calling it a reminder of how easily retail investors still lose money to unsolicited tips.
The ED has frozen trading accounts worth roughly Rs 200 crore in connection with the case, which involves two listed companies: R M Drip and Sprinklers Systems Ltd and R&B Denims Ltd.
In a post on social media, Kamath said he found it hard to believe that, even in 2026, investors are still acting on tips that arrive through WhatsApp, Telegram, SMS and social media. He described it as one of the silliest ways to lose money. He also cautioned that as the market cycle matures, such schemes, whether run through messaging groups or through influencers pushing IPOs and stocks, are likely to become more common, and that ordinary investors will not come out well.
How the alleged scheme worked
According to the details of the case, the pattern was a textbook pump-and-dump. Between April 2023 and March 2024, the two companies allegedly issued more than 3.5 crore shares and convertible warrants through preferential allotments to a small circle of connected individuals, entities and lenders. Prices were then nudged up gradually while ownership stayed concentrated in few hands.
The next phase began in late December 2025 and ran until February 2026. WhatsApp groups with names such as “Multibagger Stocks” sent out daily buy recommendations to retail investors. The groups reportedly operated out of Bhavnagar and used SIM cards registered in other people’s names. The stocks were also promoted on X and through SMS.
Retail money poured in, pushing up prices and trading volumes. Preferential allottees allegedly used that demand to sell portions of their holdings. Around 25 February 2026, the groups were deleted, and the stocks fell by roughly 70 per cent. More than one lakh investors are estimated to have lost about ₹600 crore.
Kamath’s advice: ask an AI first
Kamath’s suggestion was simple. Before acting on any message that promises easy returns, run it past an AI tool such as Claude or ChatGPT. Such a check, he indicated, can quickly spot red flags that FOMO tends to hide. He ended with the old rule that if something looks too good to be true, it probably is, which applies with particular force in the stock market.
A wider problem for retail investing
The case points to larger weaknesses in India’s retail investing landscape. Trading apps have made market participation easy and brought in millions of first-time investors, but they have also widened the opening for coordinated manipulation on social media. Preferential allotments, opaque ownership structures and promotion across several platforms are hard for regulators to track in real time. SEBI and the ED have stepped up enforcement, but action usually comes after the damage is done.
That leaves investors as the first line of defence. A tip from an unknown group, a stock with no clear business case and a sudden rush of promotion are all signs worth pausing over. As Kamath’s post suggests, a few minutes of scepticism, or a quick question to an AI tool, can cost nothing and save a great deal.