Within the scope of this research, we investigate how the disclosure of fraud affects the behaviour of investors. We pose the question as to whether or not investors who have firsthand experience with fraudulent activities in the stock market are more likely to reduce their involvement in the stock market over the short and long term than investors who have no direct experience with fraudulent activities. When comparing investors who were directly impacted by fraud with investors who were not directly affected by the scam, we utilise daily holding data from the National Stock Depository Limited (NSDL) in conjunction with a matching process. We found that investors who had direct exposure were more active in trading in the seven days after the incident compared to control investors. Furthermore, we discovered that the majority of this activity was driven by individuals cashing out of their portfolios. However, treatment investors started cashing in on their positions within a month after the market crash. The effect on under-diversification will last for a longer period of time