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In a surprising turn of events, eight payment gateways in India are under investigation of the nation’s Enforcement Directorate (ED) over an alleged crypto scam.
The allegations come as India’s ED has already taken an alert and vigilant stance on cryptocurrencies.
The case also comes in parallel to the rise in scams, hacks and other illicit crypto activities taking place in India.
ED Scrutinizes Top Payment Gateways In India
According to local media reports, the regulator has decided to freeze approximately Rs 500 crore ($57.9 million) in virtual accounts over the past two years in relation to ten Chinese nationals operating one of the largest cryptocurrency scams, HPZ Token, from India.
The ‘proceeds of crime’ that the accused reportedly gathered from persons in 20 states totaled over Rs 2,200 crore, some of which were frozen by the payment gateways before being sent to the recipients.
The money stayed with the gateways for a day or two while making bulk payments, during which time the ED frozen almost Rs 500 crore.
What Was The Modus Operandi?
Media reports mention that the accused operated a nationwide scheme including businesses registered in at least 20 states, offering investors the chance to participate in cryptocurrency mining, including Bitcoin mining, using the HPZ Token smartphone app.
Along with the Indian states of Maharashtra, Gujarat, Andhra Pradesh, Telangana, Tamil Nadu, and West Bengal, there were over 50 companies registered in Delhi with 84 bank accounts, 26 in Karnataka with 37 bank accounts, 19 in Haryana, and 11 in Uttar Pradesh.
New Case Comes As India’s ED Takes Strict Actions Against Illicit Crimes
The ED in India has been closely monitoring the cryptocurrency industry in an effort to stop illicit activity within it. Recently, as part of an investigation against Chinese nationals implicated in a cryptocurrency scam in the small state of Nagaland, the Enforcement Directorate confiscated further assets in India and Dubai valued at approximately Rs 106 crore ($12 million).
More than Rs 603 crore ($71.4 million) has been recovered in this investigation thus far. In addition to playing games and putting wagers online, the defendants—many of whom were Indian nationals—used the “HPZ Token” to search for investments.
However, this trend is not limited to India. Globally, cryptocurrency-related frauds and scams rose compared to previous years, making them a big threat to the financial markets.
The Finance Ministry of India discovered cryptocurrency exchanges that have participated in significant tax evasion previously, avoiding ₹824.14 crore (about $96 million) in Goods and Services Tax (GST).
As scams have become more sophisticated, people are more prepared to invest in riskier assets. One of the most common fraud strategies is to persuade an investor to transfer their bitcoin to a new website where the con artist instills confidence by displaying fictional high profits.
The sophistication of scams has improved along with people’s willingness to invest in risky products.
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