Chinese loan apps case: Shanghai-based parent firm mandated abusive, shaming methods

An Enforcement Directorate (ED) probe into Chinese loan apps has revealed that employees were instructed to use abusive language for quick recovery of dues from Indian debtors. The ED has recovered WhatsApp messages exchanged between the Chinese firm?s Bangalore-based official and his Shanghai-based superior that contain the incriminating instructions. The Chinese national Yan Peng Qu, the absconding director of the accused firm who supervised its illegal operations before exiting the country in November 2020, has a look-out notice issued against him.

MUMBAI: An Enforcement Directorate (ED) money-laundering probe into the Chinese loan apps case has revealed that it was the Shanghai-based officials of the Chinese-controlled firm, Mad Elephant Network Technology Private Limited, who instructed their employees to use abusive language/methods for quick recovery of dues from Indian debtors of lending mobile applications.

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The agency has recovered certain WhatsApp messages exchanged between the Chinese firm’s Bangalore-based official and his Shanghai-based superior that contain the incriminating instructions, ED sources said. “These chats were basically intended to extort money by threatening, abusing and by creating WhatsApp groups intended to harass customers who had availed of loans,” said an ED official.

On the ED’s request a look-out notice has been issued against Chinese national Yan Peng Qu, the absconding director of the accused firm who supervised its illegal operations before exiting the country in November 2020. The firm allegedly ran a large call centre in Bangalore, the employees of which interacted with prospective customers, collected KYC documents, and allegedly harassed and intimidated them into paying their dues on completion/near-completion of the usual loan-payment tenures (seven to 14 days).

“The loan apps were also used to send messages to block customers’ Aadhar and Pan cards,” the ED official said. “Customers’ relatives would also be called and told that they were guarantors and would have to pay back the customers’ pending loans. Employees of the accused company also created WhatsApp groups by using customers’ contact details and would send abusive messages in the group. They especially targeted women and sent them obscene messages.”

“The money-lending business, which was supposed to be done by the NBFC, was being done by Mad Elephant Network Technology, which provided the funds to do mobile lending business in the name of security deposit to the NBFC and undertook lending business in its name, for which it was not authorised to do under any law, and the same has also been confirmed by the RBI,” read the ED’s chargesheet, which was accessed by HT.

As per the information submitted by the NBFC to the ED, it worked with Mad Elephant Network Technologies between November 2019 and December 2020. During this period, on an alleged investment of ₹9.74 crore from Mad Elephant, which sourced the funds on loan from its Hong Kong-based Chinese parent company, loans of ₹306.97 crore were sanctioned and a sum of Rs. 89.95 crores was earned, ED officials said.

“It was ascertained from the data that the complainants took loans from various apps run by Mad Elephant Network Technology. The company directors, including Yan Peng Qu, were involved in harassing the public by extorting money from them in the name of micro-loans given through various loan apps in connivance with the co-accused,” the ED source said.

The agency’s probe further revealed that the accused firms allegedly exploited the post-March 2020 lockdown in India. “The dire need of funds at that point can be understood from the fact that borrowers were taking unsecured loans of very small amounts for a period as low as seven days at a very high processing fee and interest rates,” said the official. “During the pandemic, people had lost their jobs, and poor people were under heavy financial stress. These companies took advantage of the situation and misused their personal data to harass, blackmail and extort from them.”

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The ED has so far provisionally attached movable assets to the tune of ₹106 crore in the case. The ED’s chargesheet in March was against 12 entities / individuals, including three RBI-registered NBFCs and three Chinese-controlled fintech firms. The NBFCs were accused of letting the loan apps run their business by using their names in lieu of commission.

The ED had commenced its probe based on cases registered by the cybercrime police station, Bengaluru. The cases were registered over allegations of extortion and harassment of the public who had availed small loans through mobile apps.