The Enforcement Directorate (ED) has launched a significant investigation into a multi-crore cryptocurrency scam that has been linked to some of India’s largest payment gateways, including Paytm, Razorpay, PayU, and Easebuzz. According to reports, over ₹2,200 crore was raised from people across 20 states in India by a group of Chinese nationals, allegedly involved in operating one of the country’s biggest cryptocurrency frauds through a platform called HPZ Token. This scam, which has garnered widespread attention, involved individuals being lured into investing in cryptocurrency mining through a mobile app. However, the real aim of the scam was to funnel massive amounts of money across borders. Now, with payment gateways under scrutiny, the ED is working diligently to track the movement of these illicit funds.
The Cryptocurrency Scam: Modus Operandi and Extent of the Fraud
Reports indicate that over ₹2,200 crore was allegedly collected by the accused, originating from 20 states across India. The fraudulent funds were routed out of India through various payment gateways, and the majority of these proceeds were allegedly frozen by the Enforcement Directorate during the investigation. The suspects behind the scam reportedly operated using the HPZ Token app, which promised users the opportunity to mine cryptocurrencies, including Bitcoin, while masking their true intentions. Victims of the scam were misled into thinking they were making legitimate investments, when in reality, their money was funneled through a series of payment systems controlled by the accused. The money was routed through payment gateways, where it stayed temporarily before bulk payments were processed. During this critical process, the ED was able to freeze ₹500 crore of the scam proceeds. It is believed that some of the funds were immediately sent out of the country, leaving behind a trail for the ED to follow.
Payment Gateways Under Investigation: Paytm, Razorpay, PayU, and More
As part of its investigation, the ED has scrutinized several popular payment gateways. These include Paytm, Razorpay, PayU, Easebuzz, and others that facilitated the transactions linked to the scam. The investigation revealed that the amounts involved in the scam and subsequently frozen by the ED were significant. Here’s a breakdown of the amounts allegedly connected to each payment gateway:
- PayU: ₹130 crore
- Easebuzz: ₹33.4 crore
- Razorpay: ₹18 crore
- Cashfree: ₹10.6 crore
- Paytm: ₹2.8 crore
The ED has expressed concerns that these platforms may not have raised the red flag early enough regarding suspicious transactions. As part of the investigation, the ED is now examining whether these payment gateways filed the required Suspicious Transaction Reports (STRs). Under the regulations, all financial institutions are required to submit these reports to the Reserve Bank of India (RBI), which then passes them to the Financial Intelligence Unit (FIU) for further action.
The Role of Chinese Nationals and International Implications
The alleged scam is believed to have been masterminded by a group of Chinese nationals, who have been operating from within India for over two years. The group allegedly set up multiple companies, with more than 50 registered in Delhi alone. Additionally, the authorities found 84 bank accounts linked to these companies in the region, while other bank accounts were traced in states like Karnataka, Haryana, and Uttar Pradesh. According to reports, the scam was conducted not only in Delhi but across various states, including Maharashtra, Gujarat, Andhra Pradesh, Tamil Nadu, West Bengal, and Telangana, among others. These states witnessed large-scale operations where locals were encouraged to invest in cryptocurrency mining schemes using the HPZ Token. The involvement of Chinese nationals raises serious concerns regarding cross-border criminal activity, as the funds were sent out of the country through various illegal means. The ED is working closely with international agencies to trace the origins of these illicit transactions.
The Financial Institutions’ Responsibility and the Role of RBI
Under Indian law, financial institutions, including payment gateways, are required to file Suspicious Transaction Reports (STRs) with the Reserve Bank of India (RBI) whenever they detect irregular or potentially illegal activity. These reports are then forwarded to the Financial Intelligence Unit (FIU), which works with enforcement agencies such as the ED to investigate the matter further. The ED is now reviewing whether the payment gateways involved in this scam failed to comply with these legal requirements or whether they inadvertently allowed illicit transactions to flow through their platforms. The government is under increasing pressure to hold payment service providers accountable for any lapses in monitoring suspicious activities.
Consequences for the Payment Gateways and Future Measures
The ongoing investigation into the role of payment gateways in the cryptocurrency scam has far-reaching implications for the entire financial services industry. If these platforms are found guilty of allowing fraudulent transactions to go unnoticed or unreported, they may face severe penalties, including regulatory sanctions and potentially even legal action. Furthermore, the authorities are likely to impose stricter regulations on payment gateways moving forward. As cryptocurrency fraud continues to rise globally, regulators are focusing on tightening the rules surrounding financial transactions, especially those involving digital currencies. The case also brings into sharp focus the need for enhanced vigilance and better compliance measures from all financial institutions, including payment platforms, to prevent similar scams in the future.
Conclusion: The Ongoing Probe and the Road Ahead
As the Enforcement Directorate continues its probe into the ₹2,200 crore cryptocurrency scam, the involvement of major payment gateways such as Paytm, Razorpay, and PayU underscores the increasing risks associated with digital payments. The investigation not only highlights the vulnerability of payment platforms to illicit activities but also raises questions about the broader security of the financial sector. With more than ₹500 crore already frozen and authorities working to trace the remaining funds, the outcome of this case could have significant implications for the cryptocurrency industry and financial institutions in India. As investigations unfold, stakeholders in the financial sector will be closely watching how regulatory bodies address these issues and implement measures to prevent future fraud. The case serves as a stark reminder of the growing complexities of financial crimes, especially those related to cryptocurrencies, and the urgent need for robust monitoring systems to safeguard against such fraudulent schemes.
