Crypto Scam: India’s ED Cracks Down on Fraud Across Multiple Cities
The Enforcement Directorate (ED) of India has taken a major step towards tackling the increasing crypto scams in the country. Despite the lack of clear crypto regulatory guidelines in the country, the ED conducted a series of raids across multiple cities in India.
Notably, on December 18, the investigation agency executed search operations at 21 premises in Karnataka, Maharashtra, and Karnataka. This comes as part of a large-scale investigation to curb financial crimes and crypto fraud.
The case involves allegations of organized financial fraud, with the accused allegedly collecting funds from Indian citizens and foreign nationals under the guise of high-return investments in virtual assets. As the investigation unfolds, the ED’s findings are expected to shed light on the details of the scam and the measures taken to prevent such incidents.
How Crypto Scams Unfolded: India’s ED Uncovers Detailed Modus Operandi
According to The Hindu report today, the ED carried out simultaneous search operations at 21 locations across Karnataka, Maharashtra, and Delhi, as part of a large-scale crypto scam investigation in India’s Karnataka state. The searches, organized under the Prevention of Money Laundering Act (PMLA), 2022, targeted the residences and offices of 4th Bloc Consultants and other accused individuals and their associates.
Following a preliminary probe based on an FIR and inputs from the Karnataka State Police, the ED took action against an alleged organized financial fraud involving crypto investment platforms. As per the investigation report, the accused targeted a group of investors, including Indians and foreigners, offering fake promises of unusually high returns on crypto investments.
Unveiling the Modus Operandi
Significantly, the individuals involved in the crypto scam created convincing dupes of reputed cryptocurrency investment firms, luring unsuspecting investors in India and abroad with promises of high returns. By hijacking the identities of prominent crypto figures, they built credibility and enticed victims to invest. To build trust, they initially paid out small returns to early investors, creating a false sense of legitimacy and encouraging others to join. This represents one of the most known crypto scams- the classic Ponzi scheme tactic reminiscent of multi-level marketing (MLM) models.
To further convince investors, the crypto scam team offered referral bonuses and leveraged social media platforms like Facebook, Instagram, Telegram, and WhatsApp to aggressively promote their schemes. They allegedly used complex financial structures, including multiple cryptocurrency wallets, foreign bank accounts, and shell companies, to launder illicit money.
In addition, they reportedly used underground hawala channels, accommodation entries, and peer-to-peer crypto transfers to funnel money into India, obscuring the trail of illegal moves.
Navigating India’s Crypto Regulation
India stands far behind other progressive countries in terms of comprehensive crypto regulations. Despite identifying cryptocurrencies as Virtual Digital Assets (VDA) under the Income Tax Act, 1961, the country takes a cautious approach to crypto.
In detail, the law allows Indians to buy, sell, and hold crypto, trading on domestic or FIU-IND-registered international exchanges, and investing in crypto as a digital asset. However, the use of these assets in payments, operating unregulated exchanges or wallets, and evading tax or making anonymous transactions beyond regulatory limits are strictly prohibited. The Reserve Bank of India’s Governor Sanjay Malhotra stated, “Stablecoins, cryptos, they have a huge risk, and so we are adopting a very cautious approach towards it.”
