NSE raises the raid flag on deepfakes: Here is how you can fall prey to such scams

A deepfake video of a CEO endorsing a stock could create false hype and lead to a surge in buying, inflating the price beyond its real value.

Imagine seeing a video of your favorite company's CEO enthusiastically recommending a particular stock. You're excited - this could be your chance to make a big profit! But what if the video is  fake? This is exactly what the National Stock Exchange of India (NSE) is warning investors about - the growing threat of deepfakes being used to manipulate stock prices.

The exchange, the largest in the country, issued the warning after observing that the face and voice of CEO Ashishkumar Chauhan was being falsely used in some investment and stock advisory videos."Such videos seem to have been created using sophisticated technologies to imitate the voice and facial expressions of Ashishkumar Chauhan," the NSE said.The exchange said its officials are not authorised to recommend or deal in any stocks.

What are Deepfakes?

Deepfakes are artificially generated videos or audio recordings that are so realistic, they can be nearly impossible to distinguish from the real thing. They use artificial intelligence (AI) to superimpose a person's face or voice onto another person's body or speech.

Scenario 1:  Imagine a deepfake video of Apple CEO Tim Cook, but with the voice of someone imitating him, urging viewers to invest in a random tech company. The video could be so convincing that some investors might be fooled into buying the stock, potentially driving the price up artificially

Scenario 2: Imagine a deepfake video surfaces online featuring the CEO of a major pharmaceutical company. In the video, the CEO, whose face and voice are realistically fabricated using AI, excitedly announces a breakthrough cancer treatment about to hit the market. This fabricated news could trigger a buying frenzy as investors rush to get a piece of the "miracle cure" company.

Impact: The stock price surges based on the fake announcement, potentially reaching unsustainable highs. When the truth is eventually revealed, the stock price plummets, leaving investors who bought based on the fake video with significant losses.

Scenario 3: In May 2023, the U.S. stock market appeared to experience a dip due to an explosion near the Pentagon. The catch, however, was that no such explosion took place. A fabricated image, skillfully crafted by AI, was enough to unsettle the markets and trigger a downtrend.

 Nithin Kamath, CEO of Zerodha, a stock market platform, has raised concerns about the increasing prevalence of deepfake scams. He noted that recently, a Zerodha customer narrowly avoided a scam that could have cost them Rs 1.80 lakh. 

"India Today's Open-Source Intelligence (OSINT) Team has uncovered numerous Telegram channels offering fake documents, screenshots, and clone interfaces of popular apps like Zerodha, Groww, and Upstox. These services, charging users several thousand per month, allow them to manipulate their profit and loss statements. This proliferation of deepfake tools further exacerbates the threat to investors," said YES Securities in a note.

Even Moody’s Investor Service said that companies’ businesses and credit quality are threatened as advancing technology makes it easier to create deepfake videos and images designed to damage their reputations. Possible dangers are obvious: imagine a deepfake video showing a CEO of a listed company accepting a bribe or confessing financial fraud. Such deepfake attacks could ruin the reputations of executives and companies, and destroy irrevocable trust and shareholder value within minutes.

In August 2023, market regulator Securities and Exchange Board of India proposed that stock brokers stay away from financial influencers. Fund house ICICI Prudential Asset Management Company in January 2024 warned investors against deepfake videos of its senior executives recommending stocks.

"It has come to our attention that certain unauthorised and maliciously manipulated videos have been disseminated across various online platforms, providing stock recommendations," the fund house said, distancing itself from the videos.

In November 2023, the Indian government warned social media platforms to repeatedly remind users that local laws prohibit them from posting deepfakes and content that spreads obscenity or misinformation.

The biggest challenge with deepfakes is their increasing sophistication. As AI technology advances, it becomes harder to distinguish between a real video and a deepfake. This makes it crucial for investors to be extra vigilant and conduct thorough research before making any investment decisions based on online information.

How to protect yourself from Deepfake scams: 

Be skeptical: If you see a video online promoting a stock, especially one that seems too good to be true, be skeptical. Don't rush into any investment decisions based solely on a video.

Verify the source: Check the source of the video. Is it from a reputable news organization or the company's official website? If not, be cautious.

Look for inconsistencies: Deepfakes, while sophisticated, can sometimes have subtle inconsistencies. Pay attention to the CEO's facial expressions, body language, and any unusual voice patterns.

Do Your Research: Always conduct your own research on a stock before investing. Consider the company's fundamentals, financials, and market trends before making any decisions.

With inputs from Reuters