In a mega-multi city investigation, Republic TV has unearthed what is perhaps the biggest financial expose of 2022.

A web of Chinese links, dubious loan apps and crypto exchanges being used as a via media has come to the surface. Sources revealed that 74 fintech companies are under the scanner for cheating and 12 Non-Banking Financial Companies (NBFCs) are being probed for flouting RBI norms.

The ED has attached the bank balance of the aforesaid 12 NBFCs to the tune of Rs.105.32 crore. According to sources, the proceeds of crime in this alleged scam which involves instant loan Apps, Fintech companies, NBFCs and cryptocurrency exchanges is a whopping Rs.8,19,61,25,594.

Republic TV learnt that 10 cryptocurrency exchanges are under the scanner of agencies for laundering approximately Rs.1000 crore. WazirX is suspected to have laundered around Rs.67 crore. A week ago, ED issued a freezing order to freeze their Bank balances to the tune of INR 64.67 Crore after conducting raids on a director of Zanmai Labs Private Limited who owns this crypto exchange.

Rs 1000 Crore #NationalCryptoScam scam exposed: ‘Big loan’ conduit, crypto route to China. Tune in for the details here – — Republic (@republic) August 12, 2022

The contours of the alleged scam

During the COVID-19 pandemic, around 365 fintech Apps were involved in sanctioning instant micro loans in India and then ensuring their recovery via tele calling. For each loan sanctioned, the Apps were deducting 15-25% of the loan amount at the time of disbursement itself in the guise of processing charges. Moreover, the rate of interest was very steep even though only a few thousand rupees were sanctioned as a loan. The period of lending was in the range of 7-60 days.

In the garb of privacy permissions, these Apps accessed the contact list and social media handles of the customer. Employing hundreds of tele callers to misguide and threaten their clients, these Apps had a recovery rate of over 90%. The entire lending and recovery payment transactions of these mobile applications through payment gateways- Paytm, Cashfree and Razorpay. Sources ascertained that many of these fintech Apps sponsored by funding from China and Hong Kong inked MoUs with already registered defunct NBFCs.

In lieu of substantial commission, these Apps were allowed to do the lending business as a result of which they accrued very high profits. The agencies suspect that the fintech companies illegally parked a large quantum of their profits from the lending business in offshore accounts in the guise of bogus outward remittances through cryptocurrency exchanges. A day earlier, the ED froze Rs. 370 crore from the cryptocurrency exchange- the highest digital asset currency seizure so far.

Harrowing account

An aggrieved customer in Mumbai who took loans from such fintech Apps laid bare his harrowing experience. He told Republic TV, “Suddenly, I required money as my bills were pending. When I initially took the loan, it was shown as Rs.50,000. But I was given Rs.1000. In 7 days, I had to pay back Rs. 1500. I took loans worth over Rs.3 lakh from 10-12 applications. Their due date is 7 days. I paid back the money from time to time. If you check, I have paid more than Rs.15 lakh”.

He added, “If it is your due date, you will get a call at 9 am in the morning. They would indulge in extortion, torture and harassment. They have morphed my photos and sent them to my friends. They sent me an abusive message. They called my parents. I went to the BKC Cyber Cell with supporting documents. I talked to them”.

A police official responded, “Our investigation is going on. We were conducting a technical investigation. The (China link) is a part of the investigation”.

Republic TV visited the registered addresses of some of these fintech firms and discovered that they were paper companies. This included Huaye Tech India Pvt Ltd at 136, Udyog Vihar, Gurugram, Black Bird Tech Pvt Ltd at UG-006, MGF Metropolis, Gurugram, Finadvise Tech Pvt Ltd at 108, Udyog Vihar, Gurugram and Skyline India Pvt Ltd at 221, JMD Megapolis, Gurugram. When Republic TV arrived at these locations, it found that these companies don’t operate there.

Speaking to Republic TV, a Hyderabad police officer remarked, “In the first phase, we could trace many bank accounts which belong to the NBFCs. The NBFCs operating in India have tie-ups with the Chinese loan Apps and they issued loans against the norms of the RBI. Now, they have changed their pattern and are not approaching any NBFCs. They have opened Fintech companies by submitting fake documents. Through Fintech companies, they made tie-ups with these payment gateways and issued loans.”

WazirX’s response

Responding to Republic TV, WazirX stated, “We have fully cooperated with the ED for several days and have responded to all their queries fully and transparently. ED appears to be investigating the transactions of certain users and Zanmai Labs has no affiliation to such users and is unaware about the purpose of their transactions. Zanmai Labs is in the position of any other intermediary whose platform may have been misused. KYC details are available for all off-chain transfers as well [and have been submitted to the ED when requested]. Zanmai Labs has always cooperated completely with LEAs and provided full and complete information and shall continue to do so.”

Centre on probe against crypto exchange

During the recently concluded Monsoon session of Parliament, Union Finance MoS Pankaj Chaudhary reiterated that cryptocurrencies are not regulated in India. He was responding to an unstarred question by BJP Rajya Sabha MP Sushil Kumar Modi on August 2. However, the Union Minister mentioned that the ED was investigating two cases against cryptocurrency exchange WazirX under the provisions of the Foreign Exchange Management Act, 1999.