Continuing with its investigation into loan and betting apps run by Chinese companies, the Enforcement Directorate (ED) on Friday carried out search operations at six business and residential premises in Delhi, Ghaziabad, Mumbai, Lucknow and Gaya in connection with its money laundering probe related to the app-based token named HPZ, and related entities. The agency also froze Rs 46 crore in accounts of Paytm, Razorpay and Cashfree and Pune-based Easebuzz Private Limited in connection with the HPZ token case.
The ED said searches were also conducted at 16 other premises of banks and payment gateway branches and offices in Delhi, Gurgaon, Mumbai, Pune, Chennai, Hyderabad, Jaipur, Jodhpur and Bengaluru in respect to the case.
The ED case is based on an FIR of November 8, 2021 registered by Cyber Crime Police Station, Kohima, Nagaland.
“During the search, various incriminating documents have been recovered and seized. Huge balances were found to be maintained in the virtual accounts of the involved entities with payment aggregators. Rs 33.36 crore was found with Easebuzz Private Limited, Pune, Rs 8.21 crore with Razorpay Software Private Limited, Bangalore, Rs 1.28 crore with Cashfree Payments India Private Limited, Bangalore, and Rs 1.11 crore with Paytm Payments Services Limited, New Delhi. Total amount of around Rs 46.67 crore was detected and frozen in various bank accounts and virtual accounts,” an ED statement said.
On September 3, the ED had conducted raids at premises associated with Paytm, Razorpay and Cashfree in connection with a separate case of loan apps. In August 2020, the agency had frozen close to Rs 47 crore belonging to a Chinese company running illegal betting and loan apps in India. The agency had then held online payment gateways such as Paytm, Razorpay and Cashfree accountable for “lax due diligence” and “non-reporting of suspicious transactions”.
At least two payment gateways denied any wrongdoing on their part.
“We, at Easebuzz, would like to clarify that none of the parties mentioned in the ED’s statement belonged to our merchant base. The mentioned entities by authorities were only the counterparties of the merchant, who was using our payment gateway and this merchant had been proactively identified and blocked by us much before the investigation had started, as per our internal risk and compliance process. We intend to fully co-operate with the investigation authorities, as we are committed to ensure that our business operations comply with the existing regulations,” an Easebuzz spokesperson said.
A spokesperson from Cashfree said, “We continue to extend our diligent co-operation to the ED operations. We were able to provide the required and necessary information within a few hours on the day of enquiry. The operations and on-boarding processes of Cashfree Payments are fully compliant with existing regulations.”
According to ED, the HPZ Token was an app-based token that promised users of large gains against investment by investing in mining machines for Bitcoin and other cryptocurrencies. The modus-operandi of the fraudsters was to first lure the victims to invest in the company on the pretext of doubling their investment through the app HPZ Token.
“Payments were received from users through UPIs and other payment gateways/nodal accounts/individuals. Part-amount was paid back to the investors and remaining amount was diverted to various individual and company accounts through various payment gateways/banks from where partly it was siphoned off in digital/virtual currencies. After that, the fraudsters stopped the payments and the website became inaccessible,” the ED said in a statement.
A server-side App Token is an authentication method where the application only has access to read and write data to its own account. By using this authentication method, there is no need to authorise a user as the application is automatically authenticated as the service account that belongs to that application.
“Investigation revealed that the HPZ token was operated by M/s Lillion Technocab Private Ltd and M/s Shigoo Technology Private Limited. M/s Shigoo Technology Private Limited was also found linked to various Chinese controlled companies. It was also revealed that various other companies were indulged in receiving funds from public on pretext of operating various apps/websites for gaming/loan/others. ED suspected involvement of M/s Jilian Consultants India Pvt Ltd, Gurugram behind various companies involved in these frauds,” the ED statement said.
According to ED, one such entity, M/s Mad-Elephant Network Technology Private Limited in agreement with X10 Financial Services Limited was allegedly operating various loan apps (Yo-Yo cash, Tufan Rupees, Coco cash etc.). Similarly, Su Hui Technology Private Limited, in agreement with M/s Nimisha Finance India Private Limited, had operated loan apps, the ED claimed.