Express Investigation-Part 3 | Little or zero recovery: Why money lost in a digital scam falls down a black hole

Consider:

• Digital arrests take place over an extended period, typically lasting upto two days as seen in a Gurugram case investigated by The Indian Express. It then takes at least another day or more for victims to raise the alarm. This gives enough time for scamsters to route the stolen money through multiple mule accounts in banks across states.
•  In several cases, most of the money is withdrawn in cash from the mule accounts before the scam comes to light. And most of these mule accounts have fictitious addresses in bank records making it impossible to trace the money trail.
• And, finally, investigators point to the speed at which the scamsters operate. For instance, The Indian Express reported Monday that nearly Rs 3 crore in stolen money was whisked out of a mule account at ICICI Bank’s Jhajjar branch in 29 minutes.

There is one high-profile case, though, which shows how quick action and a bit of luck can play a key role in recovering stolen money.

In November 2024, S P Oswal, textile industrialist and chairman of Vardhman Group, transferred Rs 7 crore in all from his ICICI and HDFC bank accounts in Ludhiana before reporting the digital arrest to police. So far, the 82-year-old has recovered a total of Rs 5.27 crore from two SBI accounts in Malda, West Bengal (Rs 1.53 crore) and Guwahati, Assam (Rs 3.74 crore).

Jatinder Singh, Punjab Police’s Investigating Officer (IO) in the case, told The Indian Express that they were able to make quick recoveries due to the intervention of Indian Cyber Crime Coordination Centre (I4C), the Union Home Ministry’s cyber fraud unit, which has a network of nodal officers in major banks.

What also proved crucial in this case, the police said, was that the addresses of mule-account holders in the first layer of transfers turned out to be genuine.

“After two days of being under video surveillance, I spoke about the bank transfers to my finance officer. He realised I had been cheated and we went to the police,” Oswal said.

“Within five hours of the case being reported, the suspect accounts were frozen,” said Singh, the IO. “We were lucky because the addresses of the mule account-holders were genuine. Two persons have been arrested. We found that Rs 9.5 crore had been moved through the SBI Guwahati branch in just 10 days, including Rs 4 crore of Mr Oswal,” he said.

‘Will we get our money back?’

The other victims, meanwhile, are still grappling with a key question: “Will we ever get our money back?” The answer, for all those The Indian Express spoke to, is mired in sheafs of court papers, countless calls to officials hampered by a laborious redressal mechanism and an endless wait in queue under what they say is a “first come first serve” policy of refund. In one case, all that the victim has been able to recover so far is Rs 20.

Consider this set of illustrative cases and the reason why recovery got stalled in each:

• Retired IAF veteran Biren Yadav was defrauded of Rs 1.59 crore on August 8 last year but has got only Rs 16.1 lakh back so far. For the past 10 months, he has been waiting with a court order to get Rs 38.32 lakh of stolen money recovered from the HDFC account in Delhi of Jeevika Foundation which police say is a fictitious company run by scamsters.

Unlike the Oswal case, Yadav’s money was withdrawn from the Jeevika account within hours of deposit. “The police informed the bank only the following day by which time the money had been splintered. Also, no steps were taken to freeze any account in the next layer of transfers,” Yadav said.

Yadav has filed a case against HDFC Bank for allegedly not honoring the court’s recovery order but this has been challenged by the bank saying there were other victims in queue for the same money. He has also received at least seven notices from police in Bihar, Karnataka, TN and Andhra asking him to visit and prove his credentials since his money was moved to accounts in these states, too.

• Krishna Das Gupta, who retired as Deputy Nursing Superintendent at Medanta Hospital, lost Rs 83 lakh — her savings and pension — in May last year. She has not recovered “a single paisa” despite orders from courts because the money salvaged went to earlier claimants.

In this case, the RTGS payments made after 12 hours of digital arrest from her IDBI Bank account to an HDFC Bank account were frozen immediately. But she lost Rs 58 lakh deposited via RTGS to an SBI account in Bahraich, UP. This amount was quickly splintered by scamsters to suspected mule accounts, including an Axis Bank branch in Tripura (Rs 4 lakh) and Royal Bank of London in Delhi (Rs 10 lakh).

• The publishing professional from Noida lost Rs 84 lakh. She has recovered only around 14 lakh from money transferred to suspected mule accounts in City Union Bank and Jana Small Finance Bank. “There are 4-5 stages involved, which include hiring a lawyer, proving your credentials, and in the end getting a guarantee and so on. I have got fresh court orders for Rs 9.91 lakh but by the time the police complete the verification and banks take up my claims, the money would have gone to other victims,” she said.
• The Delhi-based scientist lost Rs 51.45 lakh to three accounts in PNB (Bikaner & Jaipur) and AU Small Finance Bank (Jaipur). “I got a court order for Rs 22.68 lakh of money recovered from PNB. But I was told all the money frozen had already been claimed. All I got from PNB was Rs 20,” she said.

Over 20 such victims have now formed a WhatsApp group to share updates on recovery, arrests, legal developments and other cases. The group’s membership profile shows that the amounts stolen range from Rs 20 lakh to over Rs 10 crore. And the victims hail from a cross-section of society, including a retired bureaucrat, a retired Army General, a scientist and a doctor. All of them had high savings, and many were senior citizens, some with children settled abroad.

Experts say this is a typically susceptible target group for digital arrest scamsters who, according to a Union Home Ministry advisory last year, obtain family and banking details through social media accounts, particularly on Facebook, and messaging apps like Telegram.
RBI guidelines state that if customers report a fraudulent transaction within three working days, they would face no liability. But cyber experts and officials say that banks “bypass this” by pointing to the victims’ own admission of voluntary transfer.

In this context, several victims raised another question — about capital gains tax being charged since the “assets” were “willingly transferred” by them, even if on the instructions of scamsters.

“The banks say the profits made by transfer of the fixed deposits and mutual funds will be taxed but the fact is that the transfers were made under stress and coercion,” said Major General N K Dhir (retd). He was trapped in digital arrest last August and transferred Rs 2 crore from his HDFC account in Noida to an SBI Account in Mumbai’s Andheri from where police found the money moved to 35 other accounts across the country.

He has recovered only Rs 2 lakh, so far. “I have been consulting my chartered accountant but it is not clear how victims of cyber fraud will escape tax liability. I may have to pay a tax of approximately Rs 15 lakh after being duped of all my life’s savings. The Government must do something about victims like us being exempted from paying tax on the money we have lost and not yet recovered,” he said.