New Delhi: Harshal Shantaram Pinjan, a 42-year-old office worker from Pune, received a series of WhatsApp links and videos related to foreign currency trading from an acquaintance four years ago.
Lured by the promise of doubling or even tripling his money, Pinjan pledged his gold and redeemed his investments in Life Insurance Corporation of India to invest Rs 8 lakh in a foreign exchange application.
Realising he had been duped, Pinjan filed a police complaint in December 2021 against his acquaintance, Abhijar Ghodnadiwala, as well as his aides—the husband-and-wife team of Suyog and Chanchal Mehta, and Pradeep Kolte.
As the extent of the fraud unravelled,
The trading platform in question, OctaFx—once promoted by Indian television stars and also a trading partner of Indian Premier League (IPL) franchise Delhi Capitals at the time—is under the scanner for defrauding thousands of people with the promise of exorbitant returns through trading in foreign currency.
“Right from reaching out to prospective customers with advertisements to rerouting of funds via a crypto exchange disguised in the form of e-commerce transactions, the use of payment aggregators establishes how professionally the app promoters orchestrated their operations,” said a top official with knowledge of the case.
“They have managed to defraud people to the tune of Rs 900 crore in just one year but we’re trying our best to get to the bottom of it.”
Police had registered a case related to cheating, criminal breach of trust, criminal conspiracy and other rules under the Maharashtra Protection of Interest of Depositors Act (MPID) and arrested six people.
In a bid to untangle the maze of operations, the anti-money laundering agency is preparing to reach out to foreign authorities to help with the money laundering probe and bring justice to the victims who have been duped of crores.
The ED is considering issuing a Letter Rogatory (LR) to seek help from foreign authorities after it found that the people running the OctaFx operations are sitting overseas in countries such as Spain, Russia, the UAE and Georgia.
Letters Rogatory are formal requests sent by the court of one country to the court of another country to seek help in the investigation or prosecution of a criminal matter.
The agency filed a “comprehensive” prosecution complaint against OctaFx’s Russian promoter Pavel Prozorov and related group entities before a special court in Mumbai last week and the process of obtaining Letter Rogatory, which will be sent to the Ministry of Home Affairs and Ministry of External Affairs, has picked up pace over the past month.
The ED, so far, has attached approximately Rs 38 crore worth of assets created by OctaFax operations in the form of cryptocurrencies, bank balances and gold coins. It has also seized approximately Rs 100 crore of holdings in demat accounts and funds available in dummy accounts.
Also read: Tired of spam calls? Your data is more at risk than your peace
Cybercrime in India has surged in the past five years because of the wider reach of the Internet and an unprecedented increase in the number of smartphone users.
The number of cybercrime complaints has shot up from just 26,049 in 2019 to 1,556,215 last year and 7,40,957 till May this year.
The Indian Cyber Crime Coordination Centre (I4C) in a report released this year pegged the losses from digital financial frauds at around a massive Rs 1.25 lakh crore over the last three years.
However, convictions and prosecutions in these cases have been abysmally low and experts have, in the past, pointed out factors such as inadequate resources and the trans-border nature of such crimes for the low success rate in such cases.
India’s anti-money laundering agency came into the picture in the OctaFX case in 2022 as it filed an Enforcement Complaint Information Report against the forex trading application and started zeroing in on the bank accounts where money was routed.
The agency in its investigation under the Foreign Exchange Management Act and Prevention of Money Laundering Act found that the app’s operators lured prospective investors by promising attractive returns on their investments.
And to win the trust of investors, they had a professionally designed interface showing multiple Indian bank accounts—which were essentially dummy entities—for the collection of funds.
“If a user has to deposit money in accounts in Indian banks, they don’t suspect that the money could be siphoned off. Asking users to deposit money in an Indian bank account on social media adds a layer of authenticity to their scheme,” an ED official told ThePrint.
Additionally, ED officials found that the people running the operations were directly in command of all these bank accounts to ensure that the frequency and magnitude of transactions remained within bank limits and didn’t activate trigger mechanisms in case of suspected fraudulent transactions.
ED officers said the OctaFx owners used a referral scheme to increase their user base rapidly.
“Using a referral mode is a classic tactic used by these fraudsters who incentivise quick onboarding and acquisition. The more people a user brings to the scheme and the faster they do it, the more attractive their trades become. This is because for every successful trade executed by people referred, the subscribers were getting a commission in their own wallet,” said another ED official.
They increased their collections with large fraudulent advertisements such as mass-level social media posts promoting the app and luring people with the idea that people could begin forex trading even with smaller transactions.
Once the funds were deposited into the accounts suggested by the operators, they were then routed to bank accounts owned by promoters.
And that’s where investors lost their money.
Investigators found the system was always stacked against investors as the people running the OctaFx operations fudged the transactions by using financial manipulation tactics such as frequent slippage and extending huge leverages.
In trading, slippage is the difference between the price at which a trade is executed and the price at which traders try to execute the transaction while leverage is a process of borrowing money from brokers while trading.
For instance, if a trader has Rs 1,000 in a trading account, he can place an order worth Rs 1 lakh with a leverage ratio of 1:100. This helps traders participate in a larger trade and maximise profit.
But since the system was always stacked against individual traders in OctaFx, their losses multiplied and they needed to deposit more and more funds to get out of a trade.
ED investigators found normal investors were always at a disadvantage with these tactics as these accumulated funds were routed to mule accounts or multiple e-wallets for the purpose of layering—a critical component in the money laundering process.
People aware of the investigation told ThePrint that the probe so far had revealed that OctaFx may have duped people of approximately Rs 900 crore through this complex process.
The ED in its investigation so far has ascertained that money defrauded from investors was routed from the primary account to several e-wallets or accounts opened with fake documents or dummy entities in the first process of layering of illicit money.
The agency has identified a list of chartered accountants and professionals who helped create fake remittance certificates and open bank accounts or shell companies for routing illicit money.
The agency officials said the company’s owners sitting in Spain, Russia, Georgia and Dubai managed the entire operation—from receiving money from investors, routing it through payment aggregators and then routing it through different investment avenues such as cryptocurrency or Alternative Investment Funds (AIFs).
Investigations revealed that a portion of the funds collected for forex trading was used to purchase cryptocurrencies through a firm named Zanmai Labs that provides banking channels to India’s biggest crypto exchange WazirX.
Cryptocurrencies purchased in India were later transferred to the world’s biggest crypto exchange, Binance.
ED officials explained that since purchasing cryptocurrencies through international platforms such as Binance was banned in India, the OctaFx owners and promoters had to purchase coins on the Indian cryptocurrency exchange such as WazirX in India which was later transferred to Binance wallets as peer-to-peer transactions (P2P).
ThePrint had earlier reported that the ED has been able to retrieve some cryptocurrencies from Binance into its own crypto wallet housed with WazirX.
Apart from buying cryptocurrencies as a mode of transferring money overseas, OctaFX also employed old-school techniques such as transferring funds into shell companies based in tax havens in exchange for services such as freight and import which existed only on paper.
Additionally, OctaFx also employed Indian individuals working in Spain and Russia to lure more and more Indian citizens to the platform for investment.
The agency has found so far that OctaFx also took the help of technical experts to establish a payment aggregator to protect itself from regulations that an entity receiving payments otherwise has to comply with.
The OctaFx promoters established a payment aggregator named Dinero Payment Services which pooled in money from investors who were putting in money through payment wallets.
“From these wallets, this payment aggregator was used to route money into accounts directed by app promoters,” an ED official said.
This payment aggregator made the movement of funds “more organised” and created an “extra layer” in the movement to throw off law enforcement agencies during scrutiny.
To make their operations seem more genuine, app promoters also established more than 30 dummy e-commerce sites such as Miracantoy Creative, Bee Fintech Pay (OPC) and Razgoy Global to create “parallel evidence” to comply with Reserve Bank of India (RBI) norms for firms dealing with inflow and outflow of funds.
“These e-commerce businesses were in operation only on paper. These were created to explain the inflow and outflow of funds in case banks grow suspicious of the nature of the transaction,” said an ED official.
Additionally, these transactions disguised as being carried out for e-commerce websites allowed app promoters to prepare contingency plans in case users sought their money back.
“As per RBI norms, platforms have to refund money within 60 days if flagged as fraudulent transactions by users. By using e-commerce websites, app promoters prepared a backup to answer banks on the nature of refund transactions,” another ED official said.
ED alleges the app’s owners routed a portion of their investments through Alternative Investment Funds (AIFs) registered with India’s market as investments to bring legitimacy to the illegally obtained funds.
According to market regulator Securities and Exchange Board of India (SEBI), AIFs are privately pooled investments incorporated in India that generally invest money into different instruments such as real estate, commodities and hedge funds after pooling investments from sophisticated domestic and international investors.
The ED has also estimated that celebrities roped in by the owners of OctaFx have corroborated the transfer of funds through Estonia and British Virgin Islands (BVI) based entities for promotional purposes.
As part of its money laundering investigation against OctaFX, ED recorded the statements of TV actors Krystle Dsouza and Karan Wahi in July in connection with their alleged promotion of the platform.
(Edited by Sugita Katyal)
Also read: It’s a spam call. But who’s calling? A deep dive into the lives of telemarketers
