Chennai (Tamil Nadu) [India], January 28 (HBTV): The Directorate of Enforcement (ED) has arrested two individuals in connection with a 'digital arrest' scam involving the use of mule accounts to defraud people, convert illicit cash into cryptocurrency, and transfer it overseas.
The investigation began following a complaint by a senior citizen to the Chennai Police, claiming that the accused had defrauded them of INR 33 lakh.
‘Both suspects played a key role in managing mule accounts, converting illicit cash into cryptocurrency, and transferring it overseas,’ stated the ED. One suspect was apprehended in Kolkata and the other in Delhi.
How the scam operated
According to the ED, the accused misused Cash Deposit Machines (CDMs) to deposit cash into accounts of companies offering fintech services. These funds were subsequently routed to individual accounts to acquire cryptocurrency, which was then used to conceal and transfer the proceeds of crime abroad with the assistance of accomplices operating with foreign phone numbers.
A network of layered mule bank accounts was uncovered during the investigation, revealing the elaborate method of routing fraudulent funds.
Searches and seizures
The ED conducted searches at over 20 locations across several states, including West Bengal, Madhya Pradesh, Uttar Pradesh, Gujarat, and Maharashtra. During these raids, multiple mobile phones, laptops, and other electronic devices containing incriminating evidence were seized. Cryptocurrency in the form of Bitcoin (BTC) and Tether (USDT) was also recovered.
The investigation revealed a sophisticated system in which cash withdrawn from mule accounts was converted into cryptocurrency and transferred to suspected overseas entities. These funds, linked to various digital fraud schemes, were routed through a well-organized network.
Lapses by fintech companies
The ED has uncovered significant lapses by several fintech companies, which failed to comply with Know Your Customer (KYC) norms. These companies accepted cash deposits from bogus entities and individuals, facilitating the movement of tainted money linked to digital crimes.
‘Several fintech companies failed to comply with Know Your Customer (KYC) norms and accepted cash deposits from bogus entities and individuals. These cash deposits, running into hundreds of crores, are suspected to be tainted money originating from digital crimes. The role of these fintech companies, their distributors, retailers, and associated bank accounts is being examined,’ stated the ED.
The investigation is ongoing, with the agency working to uncover the full extent of the scam and its international links.
(ANI)