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Chinese loan apps: ED freezes over Rs 46-cr worth funds kept in payment gateway accounts

The searches were launched on September 14 at multiple premises of the accused in Delhi, Mumbai, Ghaziabad, Lucknow and Gaya.

Chinese loan apps: ED freezes over Rs 46-cr worth funds kept in payment gateway accounts
The money laundering case stems from an October, 2021 FIR filed by the cyber crime unit of Kohima Police in Nagaland, it said

The ED Friday said it has frozen Rs 46.67 crore funds of merchant entities kept in online payment gateway accounts of Easebuzz, Razorpay, Cashfree and Paytm following raids this week against a “Chinese-controlled” investment token app.

The funds have been frozen under the anti-money laundering law.

The latest action comes after the Enforcement Directorate (ED), earlier this month, raided the Bengaluru premises of Razorpay, Paytm and Cashfree over alleged irregularities in the operations of instant app-based loan-giving companies “controlled” by Chinese persons. Later, a seizure order for Rs 17 crore kept in their accounts was issued.

The latest searches were launched on September 14 at multiple premises of the accused in Delhi, Mumbai, Ghaziabad, Lucknow and Gaya in a money laundering case being probed against an app-based token called HPZ and related entities.

Sixteen premises of banks and payment gateways in Delhi, Gurugram, Mumbai, Pune, Chennai, Hyderabad, Jaipur, Jodhpur and Bengaluru were also searched by the ED as part of the same operation, the federal agency said in a statement.

The ED case, filed under criminal sections of the Prevention of Money Laundering Act (PMLA), stems from an October 2021 FIR against the accused company and its linked persons by the Kohima Police’s cybercrime unit in Nagaland.

Also read| Fresh ED raids on Paytm, PayU, others in Chinese loan money laundering case

“During the search, various incriminating documents have been seized. Huge balances were found 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, Bengaluru, Rs 1.28 crore with Cashfree Payments India Private Limited, Bengaluru and Rs 1.11 crore with Paytm Payments Services Limited, New Delhi,” the ED said.

Rs 46.67 crore was frozen in various bank accounts and virtual accounts, it said.

A Cashfree Payments spokesperson said they “continue to extend 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,” the spokesperson said in a statement.

Paytm said the funds frozen “do not belong to the company” and the entities being investigated are “independent merchants”.

The ED said HPZ Token “promised users of large gains by investing in mining machines for Bitcoin and other cryptocurrencies.” The “fraudsters” lured the victims to invest in the company on the pretext of doubling their investment through the HPZ Token app, it said.

“Payments were received from users through UPI and other various payment gateways/nodal accounts/individuals,” the probe agency said.

While some amount was paid back to the investors, the remaining was diverted to various individual and company accounts through payment gateways/banks from where it was partly “siphoned off” in digital/virtual currencies, the agency said.

Sometime after this, the fraudsters stopped the payments and the website became inaccessible.

Also read| ED raids at over 40 locations across India linked to Delhi excise policy case

HPZ token was operated by Lillion Technocab Private Ltd and Shigoo Technology Private Limited. The latter was found “linked to various Chinese-controlled companies”, ED said.

A Razorpay spokesperson said they proactively blocked all suspicious entities who conducted illegal business through multiple payment gateways and banks about one-and-a-half years ago and have shared the details with authorities.

“None of the funds which have been directed to be frozen belong to Razorpay.

“We will continue to provide necessary information to authorities to assist in this investigation. We would like to reiterate that all our operations and onboarding processes adhere to the highest standards of governance and regulatory guidelines,” Razorpay said.

Easebuzz said, “None of the parties mentioned in the ED’s statement belonged to our merchant base.” “The entities mentioned 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 cooperate with the investigation authorities as we are committed to ensuring that our business operations comply with the existing regulations,” an Easebuzz spokesperson said.

These payment gateway firms came under the ED scanner in 2020 soon after the Covid pandemic spread in India.

A probe under the criminal sections of the PMLA was initiated by the ED after many debtors ended their lives with the police stating they were coerced and harassed by these loan app companies by publicising their personal details available in their phones and through high-handed methods to threaten them.

It was alleged the companies sourced personal data of the loan-taker at the time of downloading these apps even as their interest rates were “usurious”.

The ED had said the alleged proceeds of crime were routed through these payment gateways.

It said various other companies were also receiving funds from the public on the pretext of operating apps and websites for gaming, loans and other such online activities.

“The ED suspected the involvement of Jilian Consultants India Pvt Ltd, Gurugram, behind various companies involved in these frauds,” it said.

One such entity, Mad-Elephant Network Technology Private Limited, in agreement with X10 Financial Services Limited, was operating various loan apps like Yo-Yo cash, Tufan Rupees and Coco cash. Su Hui Technology Private Limited, in an agreement with Nimisha Finance India Private Ltd., operated loan apps, the ED said.

Finance Minister Nirmala Sitharaman had discussed issues related to illegal loan apps in a meeting of top officials of her ministry and RBI officers on September 8 and it was decided to take appropriate measures to check the operations of such apps.

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