How can one recover funds from a fraudulent institutional brokerage company? Recently, my friend invested an amount using the app called Pro. How can the money be recovered through legal procedures? He possesses all the necessary evidence to transfer the money to a different account, has been allocated an IPO with a substantial amount, and after payment through selling, they have requested additional tax; is this a legal procedure? Normally, the institutional account holder deducts commission and tax, and then pays the remaining amount to the customer. Am I correct? Kindly advise us on how to proceed with legal action.

Ans: You have raised a very important and urgent concern. I will address it from both legal and practical angles so your friend can take immediate and structured action.

» Understanding the situation
– If a brokerage asks for extra “tax” to release money, it is usually a red flag.
– Legitimate brokerages deduct TDS, GST or brokerage automatically before payout.
– No genuine broker will ask for “advance tax” from investors to release funds.
– This behaviour matches fraudulent or unregistered entities posing as brokers.

» Normal practice in regulated brokerages
– When you sell securities, the amount gets credited to trading account.
– Taxes such as STT, GST, SEBI charges and brokerage are auto-deducted.
– Balance is transferred to your linked bank account within T+1 or T+2 days.
– IPO allocation also follows regulated process through exchanges.
– At no stage will a broker ask you to pay “extra tax” to release your own money.

So yes, you are correct. The situation your friend faces is not a legal procedure.

» First immediate steps
– Stop sending further money. Fraudsters often keep demanding more to release funds.
– Preserve all proofs: app download details, payment receipts, transfer screenshots, email, chat, call recordings.
– Collect KYC documents if they were submitted, because these may have been misused.

» Legal remedies in India
– File a written complaint with the local police station under cybercrime/fraud section. Attach all evidence.
– Simultaneously, file a complaint with the National Cyber Crime Reporting Portal: www.cybercrime.gov.in
.
– Report to the Economic Offences Wing (EOW) of your state police, as fraud above certain amounts often fall under them.
– Report to SEBI (Securities and Exchange Board of India) through their complaint platform SCORES. If the app or company is not SEBI registered, SEBI will confirm that and take note.
– Inform your bank immediately. Request reversal or freeze of suspicious transaction if it’s still pending. Provide bank with FIR copy later.
– If UPI or wallet was used, report to NPCI or the concerned payment gateway.

» Civil and recovery actions
– After police FIR, you can pursue recovery through court.
– A civil suit can be filed for recovery of money, but only after criminal complaint.
– Court process is lengthy. But having FIR strengthens the case.

» Role of regulators
– Only SEBI registered brokers are allowed to offer IPO allocation and stock broking.
– You can verify registered brokers on SEBI website. If “Pro” is not listed, it is fake.
– RBI and MCA also list regulated entities. Any unlisted “institutional brokerage” is not legal.

» Protecting against such frauds
– Always verify broker’s SEBI registration number.
– Use official apps of SEBI-registered brokers only.
– Do not trust unsolicited calls, messages, or social media promotions.
– IPO allocation happens through exchange process, not through any unknown app.

» Next steps for your friend
– File complaint with police and cybercrime portal without delay.
– Share complete evidence. The faster the complaint, the higher chance of tracing money.
– Do not make any more payments to fraudsters.
– If large amount is involved, also approach a lawyer experienced in financial fraud cases.

» Finally
Your understanding is right. A genuine broker will never ask advance tax for releasing IPO proceeds. The deduction of brokerage, statutory tax, and charges happens automatically. This case clearly appears fraudulent. The immediate course is to file complaints with police, cybercrime portal, SEBI, and banks. Preserve every piece of evidence and avoid further payments. Legal recovery may take time, but quick and structured action improves chances of tracing and blocking funds.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment