OctaFX case: ED attaches crypto assets worth ₹2,385 cr of Russian mastermind

Pavel Prozorov was recently arrested by the police in Spain for his alleged involvement in cybercrimes affecting multiple countries, including India, ED officials said on Friday.

MUMBAI: The Enforcement Directorate (ED) has provisionally attached cryptocurrency worth ₹2,385 crore lying in around 100 crypto wallets beneficially owned by Russian national Pavel Prozorov, as part of its money-laundering investigation into the unauthorised operations of forex-trading platform OctaFX.

OctaFX case: ED attaches crypto assets worth ₹2,385 cr of Russian mastermind

Prozorov, named the mastermind behind OctaFX’s operations in two ED charge sheets filed in the case last year, was recently arrested by the police in Spain for his alleged involvement in cybercrimes affecting multiple countries, including India, ED officials said on Friday.

The ₹2,385-crore attachment is the largest such action undertaken by the agency against an accused located abroad, said an ED official, requesting anonymity. Cryptocurrency is a type of virtual currency that is not a legal tender in India.

The ED had shared probe-linked details regarding Prozorov and other overseas-based accused with Spanish authorities multiple times in the recent past while seeking their legal assistance in attaching assets linked to the proceeds of crime located in the European country, agency officials said.

According to the investigation, OctaFX’s total estimated profits from India could exceed ₹5,000 crore, considering it operated in the country from 2019 to 2024. Much of this amount was allegedly illegally transferred overseas, officials said.

The agency is now exploring legal and diplomatic options to question Prozorov as part of its investigation, though an official did not offer a comment when HT asked if the Russian national might be extradited to India.

The OctaFX fraud

The ED’s money-laundering investigation revealed that OctaFX was allegedly at the centre of a fraudulent scheme that involved collecting funds from Indian investors under the pretext of forex trading, for which it was not authorised in India. The platform allegedly gained traction through aggressive promotions, including sponsoring an Indian Premier League (IPL) team, and engaging various production agencies for influencer marketing, according to the ED’s charge sheets.

The platform allegedly followed a referral-based incentive model for acquiring users. Payments to these production agencies were allegedly made as foreign inward remittances through two Estonian companies. Both are related entities of OctaFX and controlled by Prozorov, according to the charge sheets.

In October 2024, OctaFX appeared in the Reserve Bank of India’s (RBI) Alert List, which includes the names of entities that are not permitted to trade in forex under the Foreign Exchange Management Act (FEMA), or operate an electronic trading platform (ETP) for forex transactions, officials said.

Prozorov is among 54 people and entities, including at least 16 fake e-commerce firms based in Kerala, named as the accused in two charge sheets the agency submitted to a court in Mumbai last year.

The OctaFX trading app and website allegedly operated in India via its local arm, OctaFX India Pvt Ltd, which is also charge-sheeted in the case. According to the ED’s charge sheets, OctaFX India Pvt Ltd was directly involved in the money-laundering operations orchestrated by its one-time director and beneficial owner, Prozorov.

According to the ED, the proceeds of crime, were allegedly diverted out of India in the guise of fake imports of services to entities controlled by Prozorov. The Russian national was, at the time, the director of another charge-sheeted entity, Octa Markets Incorporated, which served as the primary operating entity of the OctaFX brand.

The ED initiated a money-laundering investigation based on a case registered in December 2021 by the Shivaji Nagar police station in Pune against several individuals for defrauding investors by promising high returns through OctaFX. The accused allegedly tempted gullible investors by claiming they would get 2x returns in five months and 3x returns in eight months if they invested in forex trading through OctaFX.

OctaFX allegedly systematically conned Indian investors of around ₹1,875 crore between July 2022 and April 2023, generating profits of around ₹800 crore, according to the ED’s charge sheets. The probe also revealed that OctaFX had presented itself to unsuspecting investors as an online forex-trading platform for currency, commodities, and crypto trading, without having the requisite permissions from the RBI. The investors would initially receive small profits to build trust and encourage them, as is generally seen in a typical Ponzi scheme, ED officials said.

OctaFX allegedly operated through a distributed global network, designed to evade regulatory scrutiny and spread out illicit funds across jurisdictions for diversion. The probe revealed that its marketing activities were allegedly handled by entities in the British Virgin Islands (BVI), a tax haven, while certain companies and people in Spain hosted servers and back-office operations, officials said.

A few entities based in Estonia allegedly managed payment gateways for the platform, while companies in Georgia provided technical support. An entity in Cyprus served as the holding company for OctaFX’s Indian arm. Entities and people in Dubai, United Arab Emirates (UAE), allegedly oversaw Indian operations via Russian promoters, while entities in Singapore facilitated the export of bogus services to launder funds abroad, the probe has revealed.

“The ED’s probe found that OctaFX allegedly manipulated trading operations, using falsified candlestick charts and deliberate slippage, ensuring consistent investor losses,” said an ED official. OctaFX had allegedly floated a scheme, Introducing Brokers (IB), to lure more investors, wherein individuals and entities referring clients were offered hefty commissions based on client-trading activity. OctaFX also employed Indian nationals in Russia and Spain to deal with Indian clients, officials said.

The money trail

OctaFX allegedly collected investor funds via UPI and local bank transfers, which were routed through dummy Indian entities’ and individuals’ accounts to further divert them across multiple mule accounts. Unauthorised payment aggregators were allegedly found facilitating the collection and outward movement of funds into shell companies, which posed as e-commerce platforms, effectively masking the true nature of the transactions, the probe revealed.

The unauthorised payment aggregators allegedly provided merchant IDs and integration kits to the dummy entities, enabling them to accept payments that appeared to be for legitimate goods or services. The funds collected were ultimately transferred abroad under the guise of fake imports to entities controlled by Prozorov in Spain, Estonia, Russia, Hong Kong, Singapore, the UAE, and the UK, officials said. A portion of the laundered funds sent abroad were later allegedly reintroduced into India as Foreign Direct Investment (FDI), officials said.

The misappropriated funds were thereafter used for luxury consumption, property acquisitions, purchasing luxury yachts and widening OctaFX’s global footprint. A part of these funds was allegedly also parked in cryptocurrency wallets controlled by Prozorov.

In July last year, the ED conducted searches and claimed to have unveiled evidence revealing that a portion of the funds deceitfully obtained from investors under the guise of forex trading on OctaFX was funnelled into Securities and Exchange Board of India (Sebi)-registered Alternative Investment Funds as investments to present them as legitimate funds.

The ED has so far attached assets worth over ₹2,681 crore in the case, including 19 immovable properties and a luxury yacht named Cherry in Spain, allegedly owned by Prozorov.

Despite several attempts, HT could not reach OctaFX’s spokesperson for a comment on the ED’s allegations in the case. In July, an OctaFX spokesperson had told HT, “We confirm that Mr Prozorov is not associated with Octa’s current operations or legal entities. Octa operates in full compliance with applicable laws and regulatory frameworks. Like many international brokers, we work with independent, third-party payment service providers to process transactions. These providers manage their own infrastructure and compliance, including KYC, and act independently from our core business. We have no involvement in their internal processes beyond the initial broker-client transaction layer.”