Pan-India stock market scams on ED radar,

MUMBAI: An Enforcement Directorate (ED) pan-India probe into multi-crore online scams, in which investors were trapped into investing in stock markets through fake mobile apps, has revealed that the accused employed a maze of 200-plus shell firms to acquire and then divert the proceeds of crime (PoC). Some of the shell firms are located abroad.
The accused were also found tapping into encrypted online groups that sell illegal SIM cards as well as converting the PoC into crypto-currencies to hide their tainted origins. They undertook only small transactions to stay undetected, said ED sources, adding that the scamsters were also involved in human trafficking.
The agency’s money trail in the case revealed that the fraudsters allegedly incorporated over 200 shell companies irregularly for acquiring and dealing with duped investments and thereafter siphoning them off for their personal use. To comply with the requirement of giving a physical or virtual address, they used the addresses of co-working spaces, ED sources said.
The ED probe also revealed that a majority of the shell firms had acquired the approval for commencement of their business in a fraudulent manner. “Forged bank statements were submitted as proof of share subscriptions at the time of filing the INC-20A form of the ministry of corporate affairs,” the sources said. A director of the company having share capital is required to file this declaration for commencement to the Registrar of Companies within 180 days of the date of incorporation of the company.
The agency has so far arrested four persons in Bengaluru and is attempting to trace the end beneficiaries and controllers of the scam, some of whom could be located abroad. The four accused—Shashi Kumar M, 25, Sachin M, 26, Kiran S K, 25, Charan Raj C, 26—were arrested in one of the cases related to cyber-investment scams that is under the purview of the ED.
The interrogations revealed that the four were allegedly involved in the incorporation of companies and opening of bank accounts through which the PoC generated from the cyber scam were laundered. The agency’s inter-state probe, based on multiple cases registered across the country, has so far traced alleged proceeds of crime worth ₹25 crore in the course of 13 search operations undertaken recently. The agency is assessing the evidentiary value of seized incriminating material, including digital devices, ED sources said.
Shell companies, illegal SIMs, rented accounts
The agency’s investigation showed that the invested funds were allegedly transferred from the victims’ bank accounts through several intermediary accounts, including mule accounts (taken on rent by the scammers), in the bid to divert and conceal the PoC, ED sources said. The process allegedly involved a maze of transactions between bank accounts to create a convoluted web that concealed the original source of the funds. “Small transaction amounts of less than ₹5 lakh were used to avoid triggering alerts for suspicious activity,” said an ED source. “The illicit funds were routed through such shell companies.”
The probe revealed that the fraudsters allegedly got in touch with individuals within India via Telegram groups which provided SIM cards in black for hefty fees, skipping the compliance with rules. The SIMs were used to get linked with the bank accounts of the multiple shell companies or to run WhatsApp accounts to contact and defraud potential victims. The ED suspects that many such SIM cards are also shipped abroad for use in fraudulent activities by overseas-based units. The investigation further revealed that the fraudsters allegedly ran a network of rented bank accounts, which were arranged through channels on messaging apps like Telegram.
Cryptocurrency, human trafficking
“A key finding of the investigation is that the proceeds of these fraudulent activities were mostly converted into crypto currency,” an ED source said. “By converting the proceeds into crypto currency and transferring them abroad, the perpetrators aimed to avoid detection and recovery by law-enforcement agencies. A crypto currency is a convertible virtual currency, which is not legal tender in India.
The probe also revealed the use of human trafficking—in multiple instances, Indian victims were lured on the pretext of job offers and trafficked to the “golden triangle” where the borders of Thailand, Myanmar, and Laos meet. “Criminal networks force victims to work in call centres or engage in online scams under harsh and coercive conditions,” a source said.
FIRs all over India
The ED probe, under the provisions of the Prevention of Money Laundering Act (PMLA), is based on several FIRs registered by police stations all over the country. One of the victims, who approached the Faridabad police, had lost ₹7.59 crore after she was lured to invest in stocks through fake apps called IC ORGAN MAX and Techstars.shop.
The victim had clicked on a share market investment link while browsing Facebook. She was added to a WhatsApp group, where she observed that many members (who were planted by the scammers for posting fake messages) were reporting high returns on their investments. She thereafter opted to join another WhatsApp group, C6RAM Investment Academy, where she was asked to download a fake app and furnish her bank account details. Later, she downloaded another fake app.
In another FIR filed by the Noida (Uttar Pradesh) police, a businessman reported that he had lost ₹9.09 crore after he was added to a social media group called ‘GFSL Securities official Stock C 80’. In yet another case, registered with Punjab’s Bathinda police, a doctor lost ₹5.93 crore after he allegedly got induced into downloading a fake app in the name of ‘GFSL Securities’ when he was browsing Facebook.