Zerodha co-founder Nithin Kamath has revealed his experience with a multi-level marketing company that turned out to be a pyramid scheme during his early career. According to his post on X, Kamath was trying to find ways to fund his trading account when he got drawn into the fraudulent business for approximately two years starting around age 18. As reported by Kamath, he did not believe the person who introduced him had intentionally deceived him, but rather that both were misled by the company itself. Kamath admitted that he had also introduced several people to the scheme before it collapsed, highlighting the widespread nature of such fraudulent operations.
The Zerodha founder expressed surprise at the continued prevalence of such schemes in India. According to Kamath's post, he initially thought pyramid schemes were largely a thing of the past, only to discover that two new pyramid schemes launch every day in India. Citing estimates, he revealed that more than 5.5 crore Indians have lost their savings to over 5,300 such schemes, with losses estimated at around ₹10 lakh crore as of 2015, a figure he said is likely much higher today. Kamath warned that many continue to operate in India despite greater financial awareness, emphasizing that the schemes continue to exploit people's desire for quick wealth creation.
While intense competitive pressures are pushing discount brokerages to permit collateral margins for MTF purchases, exposure levels vary wildly across the sector. Kamath disclosed that while Zerodha's MTF book has grown over the last 16 months, it remains capped at roughly 25% of their net worth. However, for other brokerages across the street, that figure is flirting with 500%—the maximum exposure threshold permitted by the regulator. According to data compiled by CareEdge, the National Stock Exchange (NSE) continues to dominate the MTF segment, holding a 96% market share, with its average book scaling to ₹1.22 lakh crore. The BSE registered a sharp 58.3% year-on-year uptick to ₹0.05 lakh crore.
Reflecting on his experience, Kamath emphasized that there is no shortcut to creating wealth through investing, trading, or entrepreneurship. As reported in his post, he wrote: 'One truth my experience has taught me: there is no quick way to make a lot of money, be it trading or any other business.' He cautioned investors against products or opportunities promising unusually high returns, stating that 'Anything promising returns higher than a bank FD comes with risk. The higher the claim, the greater the risk.' Kamath linked his warning to the recent surge in retail participation in the stock market, noting that 'people spreading the word that it's easy to make money in stocks. It isn't, and the reckoning tends to come quietly, one account at a time.'
A major regulatory hurdle looms as the Reserve Bank of India's (RBI) revised regulatory amendments, deferred from April 2026, is now scheduled to kick in next month in July 2026. Analysts note that once this framework takes effect, it could significantly alter overall market liquidity, impact trading volumes, and test the endurance of bulls holding record-high leveraged positions. While market activity remains structurally supported for now by easing geopolitical tensions, the upcoming regulatory changes could reshape the current MTF landscape significantly. Kamath ended his post with a strong warning against referral-based money-making schemes, stating 'If someone tells you that you can make easy money just by introducing others, run. Almost every single one of those is a fraud.'
