Mia Tokenhart
Jun 16, 2024India’s ED Cracks Down on Cryptocurrency Scam, Charges 299 Entities
The Enforcement Directorate (ED) of India has made significant progress in its investigation into a widespread cryptocurrency scam by filing a charge sheet against 299 entities, including individuals of Chinese origin. The allegations involve duping investors under the guise of cryptocurrency mining, with specific reference to Bitcoin.
Details of the Investigation
The charge sheet, filed under the Prevention of Money Laundering Act (PMLA), was acknowledged by a special court in Dimapur, Nagaland. The investigation initially stemmed from a First Information Report (FIR) by the Cyber Crimes Unit of Kohima Police, which revealed a scheme promising substantial returns through cryptocurrency mining. Investors were lured via a mobile application called “HPZ Token,” which was used to defraud them.
Entities Involved
The charge sheet names 76 entities controlled by Chinese nationals, including 10 directors of Chinese descent, and two entities managed by nationals from other countries. These “shell entities” were created with “dummy” directors to facilitate the “layering” of criminally obtained funds. The funds, derived from illicit online gaming, betting, and investments in Bitcoin mining, were used to deceive investors with promises of high returns.
Financial Impact and Seizures
The investigation revealed that an investment of INR 57,000 (approximately $688) promised daily returns of INR 4,000 (approximately $48.27) over three months. This promise went unfulfilled after the initial payment. The ED’s search operations across the country have led to the seizure of assets and deposits valued at INR 455 crore (approximately $546 million).
Broader Investigations
In addition to the domestic crackdown, the ED is scrutinizing nine overseas companies for their roles in laundering funds from a Bitcoin-based Ponzi scheme run by Variable Tech Pte Ltd, based in Singapore. This scheme amassed 80,000 bitcoins by deceiving investors with high-return promises and diverted INR 6,606 crore for foreign property purchases through the companies under investigation.
The implicated companies are located in Hong Kong, Dubai, and Estonia, including notable names such as Amaze Mining Blockchain Research Ltd and Crypto Capital, Estonia. This investigation is part of a broader effort by the Indian government to regulate the cryptocurrency market, following the Ministry of Finance’s actions against Binance and other offshore exchanges for non-compliance with anti-money laundering policies.
Government’s Stance and Regulatory Measures
In December, compliance notices were issued to several exchanges, including Binance, KuCoin, and Huobi, by India’s Financial Intelligence Unit (FIU). These measures are designed to protect local investors from non-compliant platforms, aligning with the Prevention of Money Laundering Act (PMLA). The Indian government is actively working to curb illegal activities in the cryptocurrency space, ensuring a more secure and regulated market environment.
Conclusion
The ED’s crackdown on the cryptocurrency scam and the subsequent charge sheet against 299 entities mark a significant step in combating fraud and money laundering in the crypto market. The extensive investigation and regulatory measures highlight the Indian government’s commitment to safeguarding investors and maintaining the integrity of the financial system. As the regulatory landscape evolves, continued vigilance and stringent enforcement will be crucial in preventing future scams and fostering a transparent and secure cryptocurrency market. Through comprehensive oversight and international cooperation, India aims to establish a robust framework that supports the growth and legitimacy of digital assets.
