HPZ token app: 76 entities, their 10 Chinese directors under ED scanner

The agency’s investigation has revealed the alleged role of 299 accused persons and entities, including 76 Chinese-controlled entities

MUMBAI: The money laundering investigation by the Enforcement Directorate (ED) into the alleged bitcoin mining fraud scheme via the HPZ token app — which allegedly involves misleading the public into investing in non-existent cryptocurrency mining machines — has revealed the role of 76 Chinese-controlled entities and 10 Chinese directors in the case.

Bitcoin is a convertible virtual currency, but not a legal tender in India, and its mining refers to the method used by Bitcoin and other cryptocurrencies to produce new coins and to examine new transactions. (REUTERS)

The agency’s investigation has revealed the alleged role of 299 accused persons and entities, including 76 Chinese-controlled entities, 10 of whose directors are of Chinese origin, and two other entities controlled by other foreign nationals, ED sources said.

Bitcoin is a convertible virtual currency, but not a legal tender in India, and its mining refers to the method used by Bitcoin and other cryptocurrencies to produce new coins and to examine new transactions.

The ED had started its probe based on an FIR registered by the Cyber Crime Police Station, Kohima (Nagaland) under various sections of the Indian Penal Code, 1860 and Information Technology Act, for the alleged cheating of gullible investors who were promised higher returns on investing money to be used for the mining of bitcoins and other cryptocurrencies, in which the HPZ Token app was used, ED sources said.

The ED submitted a prosecution complaint against the 299 accused in a Dimapur (Nagaland) special court in March, whose cognisance was taken by it thereafter after finding that a prima-facie case has been made out under the Prevention of Money Laundering Act, 2002 against the said accused persons, the sources said.

The inquiry revealed that various bank accounts and merchant IDs had allegedly been opened by bogus firms, with dummy directors /proprietors, for rotation of the proceeds of crime representing funds fraudulently received for illegal online gaming and betting and investment for bitcoin mining, the sources said.

The modus operandi of the accused, the source explained is that for an investment of ₹57,000, returns at the rate of ₹4,000 per day for 90 days were allegedly promised to the investors but the money was paid only once and thereafter fresh funds were sought.

As part of its probe, the ED conducted search operations at 44 locations across the country, including Mumbai, in the past and an amount of ₹176.67 crore, which were maintained by the bogus entities in various banks/virtual accounts, were frozen. The agency also provisionally attached movable and immovable properties to the extent of ₹278.70 crore held in the name of several dummy entities. ED’s total seizure and attachment in the case stands at ₹455.37 crore.

The CBI, meanwhile, on Wednesday carried out searches across 30 locations in 10 states and union territories, including Mumbai as part of its crackdown against two private firms — Shigoo Technology Pvt Ltd and Lillian Technocab Pvt Ltd and their directors — for allegedly duping investors via the app-based fraudulent scheme. The CBI investigation revealed the existence of around 150 bank accounts that the accused had allegedly used to collect funds from investors. The accused, allegedly utilised the funds for payouts to the previously duped investors to build trust and attract more investors.

“The collected investment was either converted into cryptocurrency or diverted abroad illegally via hawala channels,” a CBI source said. The CBI had booked the firms and their directors under sections 120B (criminal conspiracy), 419 (cheating by personation) 420 (cheating) and relevant sections of the Information Technology Act, agency sources said.

The agency’s searches have resulted in the seizure of a range of digital evidence, including mobile phones, computer hard drives, SIM cards, ATM/ debit cards, email accounts and documents, the sources added.