Bengaluru: In a significant breakthrough, the Enforcement Directorate (ED) has arrested four individuals in Bengaluru and traced over Rs 25 crore of money that was laundered through an online stock market investment scam.
Investigations revealed that Shashi Kumar M, 25, Sachin M, 26, Kiran S K, 25 and Charan Raj C, 26, had incorporated shell companies by using co-working space addresses in the city. They opened bank accounts linked to these companies, which were then used to convert the proceeds of the crime into cryptocurrency.
The ED's investigation was based on three FIRs filed in Faridabad, Noida and Bathinda, where victims were defrauded of Rs 7.59 crore, Rs 9.09 crore, and Rs 5.93 crore, respectively. Kumar, Sachin and Kiran were arrested on August 15 and Raj on August 21. A special court subsequently remanded them in the ED’s custody for seven days.
"So far, 13 searches have been conducted under Section 17 of the PMLA, 2002, at various premises which led to the seizure of various incriminating material, including mobile phones and other digital devices. ED investigation under PMLA, 2002, has, so far, traced proceeds of crime of more than Rs 25 crore generated from this investment cyber scam,” the ED said in a statement.
Modus operandi
According to the ED, the victims were lured through Facebook, Instagram and WhatsApp with promises of "high returns on their investment, allotment of IPOs through special quota, etc".
Once victims showed interest, they were added to WhatsApp/Telegram groups, which were named after well-known financial institutions like ICICI Securities, GFSL Securities, SMG Global Securities, Blackrock Capital and JP Morgan to lend credibility.
In these groups, individuals planted by the scamsters would share fake "success stories" to further convince the victims. The victims were then directed to download fake apps via APK file links shared through private messages.
These fake apps mimicked the interface of legitimate trading apps, displaying the names of popular stocks and showing fictitious gains to keep victims invested. Then, the scamsters ask victims to transfer money to the bank accounts of shell companies.
"These returns are entirely fictitious and do not exist in reality. They are just numbers shown on these fake apps," the ED said.
The con was realised only when victims tried to withdraw the money but didn't succeed. At this point, the scamsters would ask them to pay "statutory taxes, brokerage fees" etc. When the scamsters realised the victim would not pay up anymore, they ceased all contact.
In November 2023, DH was the first to report the scale of the scam, in which three Bengalureans and 23 from other parts of India lost a combined Rs 2.9 crore over four months.
Well-oiled machine
The ED's investigation revealed that SIM cards were illegally obtained from black marketers via Telegram channels and shipped abroad after activation. The SIMs were either linked with bank accounts of the shell companies or used to set up WhatsApp groups, according to the ED.
The agency also found that hundreds of shell companies had been created using co-working space addresses to siphon off the proceeds of the crime.
Further investigation uncovered forged bank statements submitted as proof of share subscription by shareholders during the filing of Form INC-20A (required to be filed on the MCA portal for a company’s commencement of business) and a network of mule accounts, rented through Telegram channels, to launder the money.
"Small transaction amounts (less than Rs 5 lakh) are used to avoid triggering alerts for suspicious activity. The illicit funds are routed through these shell companies," the ED said.
Finally, the proceeds were converted into cryptocurrency to avoid trace and detection and transferred abroad.