ED scans FEMA violations worth ₹400 crore by state-based group of firms

The Enforcement Directorate has begun investigating a Maharashtra-based group of companies for alleged Foreign Exchange Management Act violations worth INR400 crore ($53m). The group is suspected of illegally trading cryptocurrencies and transferring the proceeds abroad. The organisation is alleged to have collected funds via cash and cheques from investors, promising returns through foreign investments. The cash has been sent abroad through hawala channels, while the funds paid by cheque are remitted out of India via shell entities, in violation of FEMA regulations.

Mumbai: The Enforcement Directorate (ED) has taken under its scanner a Maharashtra-based group of companies for alleged FEMA (Foreign Exchange Management Act) violations to the tune of ₹400 crore through multiple illegal trades.

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The illegal trades the group of companies is allegedly involved in include cryptocurrency exchange and siphoning off the proceeds abroad.

The ED’s investigation found that the suspected entities are allegedly collecting funds, in cash as well as via cheques, from individuals, including from Mumbai, for potential investment with lucrative returns abroad, including United Arab Emirate (UAE)’s stock/currency exchanges, in violation of the established rules, an ED source said.

The agency’s investigation showed that while the cash collections are allegedly sent abroad via hawala channels, the funds paid via cheques are remitted out of India via shell entities having presence abroad, the ED source said adding, the returns come using the same route, in violation of FEMA’s provisions.

“The estimated FEMA violations by the group of companies under the scanner will be around ₹400 crore,” the source said.

“The firms under the scanner have adopted a novel method, to skip the regulators’ scanner, in remitting money abroad for investments,” said the source.

“It’s being verified if the suspected firms are investing the collected funds into entities that they are promising, for instance, the Dubai exchange, or have instead mimicked them with something of their own,” said the ED source.

The ED had initiated its investigation into the alleged FEMA violations by the suspected firms, whose owner stays in Dubai, for their unauthorised trades, including cryptocurrency exchange and digital wallet services.

It was noticed that the proceeds were being siphoned off through hawala to various foreign countries, ED sources said. The ED had recently provisionally attached assets to the tune of around ₹28 crore belonging to these firms.

The ED’s probe alleged that the firms under the scanner have in all remitted around ₹500 crore abroad in contravention of the FEMA’s provisions via illegal trades.

On the ED’s radar is also a Pune-based multi-state co-operative credit society, a venture floated by the firms under the scanner, to lure investors into fake schemes, wherein the latter was allegedly offered 2% to 4% interest per month.

There is a likelihood of the ED initiating a money-laundering investigation into the alleged irregularities as it is likely to refer complaints for filing of police case/s in Pune or Mumbai, the source said.