Fraudulent Treding

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 Fraudulent trading is a serious corporate and criminal offense that occurs when a business is carried on with the intent to defraud creditors or for any other fraudulent purpose. It involves a deliberate, dishonest intention to deceive, often by incurring debts while knowing the company cannot repay them. [1, 2]




The concept operates differently depending on whether you are referring to the corporate insolvency perspective (where the company is being wound up or reorganized) or the cyber/consumer perspective (where retail investors are tricked by fake financial platforms). [3, 4]

1. The Legal & Corporate Perspective (Insolvency Law)

In many jurisdictions, such as the UK (under the Insolvency Act 1986) and India (under the Insolvency and Bankruptcy Code, Section 66), liquidators and resolution professionals can take legal action against directors or involved parties.
  • Civil Liability: If found liable, the court can order the responsible individuals (including directors or third parties) to make personal contributions to the company's assets to cover creditor losses.
  • Criminal Liability: It is also a standalone criminal offense, which can carry heavy fines and significant prison sentences (up to 10 years in some jurisdictions).
  • Wrongful vs. Fraudulent: Fraudulent trading requires proof of actual, active deceit and dishonest intent. It is distinct from wrongful trading, which is a civil wrong that occurs when directors simply fail to minimize losses while running a company that they knew had no reasonable prospect of avoiding insolvency. [1, 2, 3, 7]
2. The Consumer & Cybercrime Perspective (Investment Scams)

In recent years, "fraudulent trading" is also widely used to describe fake online trading scams, where fraudsters set up illegal, clone, or unregulated platforms to lure retail investors.
  • How It Works: Scammers lure victims through social media, dating sites, or messaging apps with promises of massive, guaranteed returns on forex, crypto, or share trading. Victims are shown fake profits on their account dashboards and encouraged to invest increasingly large sums. Ultimately, the scammers disappear with the funds, leaving the accounts drained. [9, 10, 11, 12, 13]
What To Do If You Are a Victim

If you are located in India and have been the victim of a fraudulent trading platform or scam, you must act immediately:
  1. Freeze Your Accounts: Contact your bank or card issuer right away to block any unauthorized transactions and dispute the charges.
  2. Report the Fraud: Call the National Cyber Crime Helpline at 1930.
  3. File a Complaint: Lodge a detailed formal complaint on the official National Cybercrime Reporting Portal with all transaction IDs and screenshots.
  4. Verify Platforms: Always ensure any broker or financial advisor you deal with is officially verified (e.g., in India, by checking the Securities and Exchange Board of India registry) before transferring funds. [8]



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