ED launches probe in multi crore stock market frauds run with fake apps

MUMBAI: The Enforcement Directorate (ED) has initiated a money-laundering investigation into an alleged multi-crore fraudulent online scam in which a large number of gullible investors across the country were cheated of their hard-earned money by inducing them to invest in stock markets through fake mobile apps.

The agency’s inter-state probe, based on multiple cases registered across the country, has so far traced alleged proceeds of crime worth ₹25 crore in the course of 13 search operations undertaken recently as part of the probe for further action. The agency is in the process of tracing companies and bank accounts, which were incorporated and opened, respectively, through which proceeds of crime generated from the cyber scam were laundered and assessing the evidentiary value of seized incriminating material, including digital devices, ED sources said. One of the victims lost ₹7.59 crore after the frauds lured her to invest in stocks through fake apps. In another case, a victim lost ₹9.09 crore in the fraud.

ED’s probe has revealed that the proceeds of these fraudulent activities were mostly converted into cryptocurrency to allegedly camouflage the origins of the illicit funds collected by them and to facilitate their diversion abroad, ED sources said. “By converting the proceeds into cryptocurrency and transferring them abroad, the perpetrators aimed to avoid detection, tracing, and recovery by law enforcement agencies,” an ED source said. A cryptocurrency is a convertible virtual currency, but not a legal tender in India.

The agency’s probe also revealed the alleged involvement of human trafficking and the use of foreign jurisdictions in the fraud, ED sources said. ED’s probe revealed that in multiple instances, Indian victims were lured on the pretext of job offers and trafficked to the “golden triangle”, where the borders of Thailand, Myanmar, and Laos meet.

“Criminal networks force victims to work in call centres or engage in online scams, under harsh and coercive conditions,” a source said. The Golden Triangle is known for illicit activities, including drug trafficking and human trafficking, the sources said. The agency has so far arrested four accused persons in Bangalore as part of the case probe and is attempting to trace the fraud’s end-beneficiaries / controllers, agency sources said.

MODUS-OPERANDI:

ED’s probe revealed that the victims were being cheated by allegedly entrapping them into fraudulent stock market investment options, wherein the first step involved attracting them on social media platforms by promising them high returns on their investments, allotment through special quota of Initial Public Offering (IPO), by which a firm gets listed on a stock exchange and seeks money from investors, among others.

Once potential victims/investors seem interested, the fraudsters then add them to WhatsApp/Telegram groups, having fake members planted by the latter for sharing fake, fabricated success stories to entrap/mislead others, ED sources said. “These fraudulent WhatsApp groups have names similar to well-known apps/financial institutions, to create an impression that these fraudulent groups are genuine,” an ED source said.

Once the potential victims are convinced about the genuineness of the fraudulent WhatsApp/Telegram groups, the accused handling the groups ask the former to install fraudulent mobile apps for the purpose of investments, the source said. For the purpose of installing the apps, the fraudsters also share “links or APK files” over WhatsApp, the source said. “The names of various stocks, futures, options, forex, among others, shown in these apps are the same as that of well-known companies to create an impression that the apps are genuine,” the source said. The fraudsters thereafter allegedly induce the victims to invest in various fake IPO stocks or fake stocks and make them transfer their money to the bank accounts of shell companies created for the specific purpose of collection of these cyber-crime proceeds, the source said.

To build trust, the potential victims might initially get good returns on their investments as shown in the dashboard of such fraudulent apps, which could encourage them to invest more even though such projected returns are allegedly fictitious. While potential victims may invest more funds, they eventually realise that they are unable to withdraw their funds already invested. When the victims attempt to withdraw their money from such apps, the fraudsters ask them to pay so-called statutory taxes, and brokerage fees, among others, to extract more money, the sources said.

“Once the scammer believes that they have extracted as much money as possible, they cut off all communication and disappear, leaving the victim helpless and with no recourse. One such app had a message, ‘Please contact customer care to complete the repayment first’, when a victim tried to withdraw his money,” the ED source said.