The Rising Risks in Crypto Investment: A Lesson from Telegram-Based Scams in India

The cryptocurrency boom in India has unlocked unprecedented opportunities, but it has also exposed investors to a shadowy underbelly of fraud. In 2025, Telegram-based scams have emerged as a particularly insidious threat, leveraging psychological manipulation, regulatory gaps, and technological anonymity to defraud victims of millions. From a Delhi techie losing Rs 12 lakh to a Hyderabad man defrauded of Rs 1.29 crore, these cases underscore a systemic failure in investor protection and highlight the urgent need for a robust regulatory framework.

The Anatomy of Telegram Scams: A Behavioral Finance Perspective

Telegram scams in India often follow a predictable pattern: scammers create fake investment groups or job offers, lure victims with promises of "guaranteed returns," and use small initial profits to build trust before vanishing with larger sums. This strategy exploits core principles of behavioral finance.

Overconfidence and the Sunk Cost Fallacy: Victims like Ankit Chaudhary, who lost Rs 12 lakh, often fall prey to the illusion of control. Early profits create a false sense of security, leading investors to ignore red flags and double down on their bets. Behavioral studies show that individuals overestimate their ability to assess risk, a bias that scammers weaponize to trap victims in a cycle of escalating investments, according to a TechObserver report.

Herding Behavior and Social Proof: Scammers exploit the human tendency to follow the crowd. Fake testimonials and bot-driven interactions in Telegram groups create an illusion of legitimacy, pressuring victims to act impulsively. For instance, a woman in an unnamed location was convinced to make UPI payments for "unlocking" higher-level incentives after seeing fabricated success stories, as reported in an Outlook India piece.

Loss Aversion and Emotional Triggers: Scammers also prey on the fear of missing out (FOMO) and the desire to recover losses. A man in Greater Noida lost Rs 51 lakh after being promised "high returns" through a Telegram group, a classic example of how emotional triggers override rational decision-making, as documented in Aseem Juneja's report.

Regulatory Gaps: A Systemic Vulnerability

India's digital asset framework remains fragmented, leaving investors exposed to exploitation. While the government imposes a 30% tax on crypto gains and mandates anti-money laundering (AML) norms, it lacks enforceable protections for virtual digital assets (VDAs). This creates a "taxation without representation" scenario, where investors bear financial burdens without legal recourse.

Jurisdictional Limbo and Enforcement Challenges: Many Indian exchanges, such as WazirX, have shifted their headquarters to offshore jurisdictions like Singapore, complicating recovery efforts for victims. For example, the WazirX-Zanmai controversy highlighted the difficulty of recovering funds after a 2024 hack, as legal battles play out in foreign courts, as noted by TechObserver.

Absence of Custody Frameworks: India's reluctance to establish a clear custody framework for digital assets further exacerbates risks. Without mandatory "proof of reserves" or insurance for user funds, investors are left vulnerable to hacking and fraud. Experts argue that adopting models like Singapore's licensing regime for custodians could mitigate these risks, a point also raised by TechObserver.

Delayed Regulatory Action: Despite the proposed COINS Act and the Crypto Assets Regulatory Authority (CARA), the government remains cautious, fearing systemic risks to India's financial ecosystem. This hesitation has allowed unregulated platforms to thrive, with many investors turning to foreign exchanges like Binance, where tax liabilities are lower but oversight is nonexistent, according to TechObserver.

A Path Forward: Investor Education and Regulatory Clarity

Combating Telegram-based scams requires a dual focus on behavioral interventions and institutional reforms.

1. Behavioral Nudges for Investors:
2. Red Flag Recognition: Educating investors to identify red flags-such as unsolicited offers, pressure to invest quickly, and unverified "gurus"-can reduce susceptibility to scams.

3. Emotional Discipline: Encouraging a "cooling-off" period before large investments can counteract impulsive decisions driven by FOMO or overconfidence.

4. Regulatory Reforms:

5. Mandatory KYC and Proof of Reserves: Requiring exchanges to implement strict know-your-customer (KYC) norms and demonstrate asset reserves would enhance transparency.
6. Custody Frameworks: Establishing a legal framework for digital asset custody, akin to the U.S. SEC's approach, would protect user funds and deter fraud.

7. Cross-Border Collaboration: Strengthening international cooperation with jurisdictions like Singapore and Dubai could streamline recovery efforts for victims of offshore scams.

8. Public-Private Partnerships:

9. Collaborating with platforms like Telegram to monitor suspicious activity and report scams in real time could disrupt fraudulent networks.

Conclusion

The rise of Telegram-based crypto scams in India is not merely a technological or legal issue-it is a human one. By understanding the psychological vulnerabilities that scammers exploit and addressing the regulatory gaps that enable their operations, India can build a safer digital asset ecosystem. As the COINS Act and CARA inch closer to implementation, the priority must be to protect retail investors while fostering innovation. The stakes are high, but with the right mix of education, regulation, and behavioral insights, the future of crypto in India can be both promising and secure.