The Enforcement Directorate (ED) has frozen assets worth Rs 370 crore in bank balances, payment gateway balances and crypto balances of Flipvolt Crypto-currency exchange held by Bengaluru-based firm Yellow Tune Technologies Private Limited which was allegedly being used by Chinese fintech app firms to launder their India revenues.
The ED reported the seizures Friday following searches carried out at the premises of Yellow Tune Technologies in Bengaluru.
“Following criminal investigations of Chinese fintech apps operating in India, many of the app operators had laundered funds through cryptocurrency with Flipvolt Cryptocurrency before shutting shop in the country,” the ED said Friday.
A central agency’s statement read, “While doing fund trail investigation, ED found that large amounts of funds to the tune of Rs 370 crore were deposited by 23 entities, including accused NBFCs and their fintech companies, into the INR wallets of M/s Yellow Tune Technologies Private Limited held with Crypto Exchange M/s Flipvolt Technologies Private Limited.”
“These amounts were nothing but proceeds of crime derived from predatory lending practices. Cryptocurrency purchased was transferred to various unknown foreign wallet addresses. Further, searches were conducted at various premises of M/s Yellow Tune Technologies Private Limited on 08.08.2022 to 10.08.2022 in order to locate the beneficial owners of this company, and that of recipient wallets,” the ED said.
“But the company’s promoters are untraceable. It is found that this shell entity was incorporated by Chinese nationals Alex and Kaidi (real name not known) with the active connivance of willing CAs/CS and the Bank Accounts were opened in the name of dummy directors,” the ED added.
The Chinese nationals operating the fintech apps left India in December 2020 and the bank credentials and digital signatures of dummy directors were shipped abroad and were used by them to launder the funds collected in India, the ED said. Funds to the tune of Rs 2.31 crore belonging to Yellow Tune Technologies itself have been seized, the agency informed.
“Yellow tune by using the assistance of Flipvolt Crypto-Exchange which has very lax KYC norms, no EDD mechanism, no check on the source of funds of the depositor, no mechanism of raising STRs, etc assisted the accused fintech companies in avoiding regular banking channels, and managed to easily take out all the fraud money in the form of crypto assets,” the ED said in its official statement on the investigations.
“Furthermore, despite giving repeated opportunities, Flipvolt Crypto-exchange failed to give the complete trail of crypto transactions made by M/s Yellow Tune Technologies Private Limited. Nor could it supply any form of KYC of the opposite party wallets,” the ED added.
“The lax KYC norms, loose regulatory control of allowing transfers to foreign wallets without asking any reason/declaration/KYC, non-recording of transactions on Blockchains to save costs have ensured that Flipvolt is not able to give any account for the missing crypto assets. It has made no sincere efforts to trace these crypto assets,” the ED said.
“By encouraging obscurity and having lax AML norms, it has actively assisted M/s Yellow Tune in laundering the proceeds of crime worth Rs 370 Crore using the crypto route. Therefore, equivalent movable assets to the extent of Rs 367.67 Crore lying with Flipvolt Crypto-exchange in the form of Bank and Payment Gateway Balances worth Rs 164.4 Crore and Crypto assets lying in their pool accounts worth Rs 203.26 Crore, are frozen under PMLA, 2002, till complete fund trail is provided by the crypto-exchange,” the ED added.