OctaFX used 16 fake e-commerce firms to disguise investor funds: ED probe

The funds were routed through unauthorised payment aggregators and escrow accounts, adding layers to obscure ownership and transaction purpose, officials said.

MUMBAI: The Enforcement Directorate’s (ED’s) ₹800-crore money-laundering investigation into unauthorised foreign-exchange trading platform OctaFX and its associates has revealed that it allegedly used the services of fintech professionals to create mule bank accounts and linked them with fake e-commerce websites to gain access to payment gateways so that it could disguise investor’s funds as payments towards online purchases, according to officials aware of the developments.

OctaFX used 16 fake e-commerce firms to disguise investor funds: ED probe

The funds were then allegedly routed abroad towards payments for non-existent imports and freight services, officials said. The agency’s probe also revealed that 16 such fake e-commerce firms were allegedly set up in Kerala’s Ernakulam district, their offices crammed in two modest buildings, after obtaining the documents of a few unsuspecting locals through manipulation, officials added.

“ED’s investigation revealed that OctaFX, which was not authorised by the Reserve Bank of India (RBI) to deal in foreign exchange in the country, had allegedly laundered funds by gathering investor money through the mule accounts in the names of fake e-commerce firms,” an ED official said. “The funds were routed through unauthorised payment aggregators and escrow accounts, adding layers to obscure ownership and transaction purpose,” the official added.

In October 2024, OctaFX appeared in the RBI’s Alert List, which includes the names of entities that are not permitted to trade in forex under the Foreign Exchange Management Act (FEMA), 1999 or operate an electronic trading platform (ETP) for forex transactions, officials said.

According to the ED, a Russian national identified as Pavel Prozorov is the mastermind behind OctaFX’s operations in India. He is among 54 people and entities, including the 16 fake e-commerce firms and associated entities, named as the accused in two charge sheets the agency has submitted to a court in Mumbai between October and December 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 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.

OctaFX, its local arm and associated entities allegedly cheated Indian investors to the tune of ₹800 crore in the guise of forex trading in a short span of nine months—from July 2022 to April 2023. The proceeds of crime, according to the ED, were allegedly diverted out of India in the guise of fake imports of services to entities controlled by Prozorov, who 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.

16 dubious e-commerce firms

The ED’s probe found that eight of the 16 allegedly fake e-commerce entities—Hristigo Enterprises Private Limited, Radamel Services Private Limited, Razgoy Global Private Limited, Wetega Enterprises Private Limited, Anchel Enterprises Private Limited, Tractea Global Private Limited, Drenkeet Enterprises Private Limited and Salahio Enterprises Private Limited—were located on the first floor of a building in Edathala in Kerala’s Ernakulam district.

The offices of the remaining eight entities—Totelmon Ecommerce Private Limited, Kramet Ventures Private Limited, Oxterio Solutions Private Limited, Suhozer Solutions Private Limited, Senitum Solutions Private Limited, Daleter Ventures Private Limited, Veyola Services Private Limited and Galabs Solutions Private Limited—were located in another building in the same district at Palarivattom, which is Kochi’s central business district.

“The ED’s probe found that the current accounts of the fake e-commerce websites opened in the name of fictitious shell companies, purportedly working in the e-commerce segment, to get on-boarded by payment gateways for the purpose of receiving funds from forex investors,” an official said. “The Know Your Customer (KYC) processes done by payment gateways showed such e-commerce firms as providing e-commerce services, and funds from investors were disguised as payments for purchases made on these websites,” the official added.

Even bank accounts were allegedly opened in the name of mules or hired owners who had no control over the usage of the accounts, which remained active for short durations, the official said. Mobile numbers and emails linked to these mule accounts were allegedly controlled by unidentified third persons, while dummy directors were hired for such shell firms and tutored by certain former bankers to respond to queries in case of KYC verifications or field verifications, the official added.

These shell companies were allegedly run by dummy directors who were paid minimal salaries, but the actual operations were controlled by individuals compensated on a commission basis, according to the ED. The layered funds were then allegedly transferred outside India. Invoices were allegedly fabricated to justify the outward remittance of funds, with over $4.2 million being transferred abroad, according to the ED chargesheet.

Modus operandi

The 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 engaged various production agencies for influencer marketing, according to ED’s charge sheet.

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 sheet.

The ED has also accused OctaFX of deliberately changing its login URLs and web addresses to obscure its fraudulent operations from investors. The platform allegedly manipulated trades to cause significant investor losses, while siphoning funds into e-wallets and accounts of fictitious entities.

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 the OctaFX platform was funnelled into Securities and Exchange Board of India-registered Alternative Investment Funds as investments to present them as legitimate funds.

The ED also accused OctaFX of hiring several Indians working in Spain and Russia to operate the trading platform and interact with Indian citizens to lure them into investing in forex trading.

Predicate case and attachments

The ED’s case is based on a First Information Report (FIR) registered by the Shivaji Nagar police station in Pune in December 2021 against a set of accused persons for allegedly duping people into investing money via OctaFX by claiming they would get high returns.

The central agency’s probe revealed that the accused 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. While some of the funds collected were allegedly invested through the online trading app, the remaining amount was used to run an illegal Ponzi scheme, giving 2x returns to a few initial investors to rope them in. Major parts of the collections were used for the personal benefits of the accused, including the purchase of luxury goods, officials said.

The ED has so far provisionally attached assets worth over ₹296 crore in the case, including properties worth ₹131.45 crore belonging to Prozorov in Spain. These included a luxury yacht, two bungalows, a mini jet boat and a Mercedes car. Agency officials said that the overseas attachments were possible after six months of intensive efforts and with the assistance of Spanish authorities under the provisions of the Mutual Legal Assistance Treaty between the two countries.

Now, the anti-money laundering agency is planning to approach Interpol to issue Red Corner Notices against the accused. This would facilitate the detention or arrest of some of the accused staying abroad in Interpol member countries. The agency will also send a Letter Rogatory, or a judicial request, to Spain for providing their assistance in conducting a search and seizure with a group of ED officials locally.

OctaFX’s rebuttal

When contacted about the ED’s findings, a spokesperson for OctaFX said, “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.”

The spokesperson added, “Octa remains open to cooperation with the relevant authorities and is ready to assist in accordance with legal procedures.”