The Enforcement Directorate (ED) on Friday said it has attached Rs 370 crore worth deposits — invested in bank, payment gateway and crypto accounts — of a Bengaluru-based “shell” company incorporated by two Chinese nationals who left the country in 2020.
The federal agency froze the funds after it raided the premises of the company, Yellow Tune Technologies Pvt. Ltd, located in Karnataka’s capital city over three days, starting August 8.
The agency stumbled upon the alleged illegal activities of the company during its ongoing money laundering probe against some dubious smartphone-based loan lending apps which are stated to be “backed by” Chinese funds.
These apps, according to the ED, soon shut shop and “diverted” their profits.
“While doing fund trail investigation, ED found that deposits to the tune of Rs 370 crore were deposited by 23 entities, including accused NBFCs (non-banking financial companies) and their fintech companies into the wallets of Yellow Tune Technologies Private Limited held with crypto exchange Flipvolt Technologies Private Limited.”
“These amounts were nothing but proceeds of crime derived from predatory lending practices,” the agency said in a statement.
It said crypto currency, so purchased, was transferred to various unknown foreign wallet addresses.
The agency said it raided the company (Yellow Tune) to locate its “beneficial owners” and that of the recipient wallets.
“But the company’s promoters are untraceable. It is found that this shell entity was incorporated by Chinese nationals Alex and Kaidi (real names not known) with the active connivance of willing CAs (chartered accountants) and CSs (company secretaries) and the bank accounts were opened in the name of dummy directors,” it said.
These Chinese nationals left India during December 2020, and later the bank internet credentials, digital signatures of dummy directors were shipped abroad and used by the said Chinese nationals to “launder the proceeds of crime.”
It said Yellow Tune, with assistance from Flipvolt crypto exchange, which has “very lax KYC norms, no EDD (extended due diligence) mechanism, no check on the source of funds of the depositor, and no mechanism of raising STRs (suspicious transaction reports) assisted the accused fintech companies in avoiding regular banking channels, and managed to easily take out all the fraud money in the form of crypto assets.”
The agency said despite giving repeated opportunities, Flipvolt crypto exchange “failed” to give the complete trail of crypto transactions made by Yellow Tune Technologies Private Limited.
It alleged that the crypto exchange “could not supply any form of KYC of the opposite party wallets.”
“The lax KYC norms, loose regulatory control of allowing transfers to foreign wallets without asking any reason/declaration/KYC, non-recording of transactions on blockchains to save costs etc, has ensured that Flipvolt is not able to give any account for the missing crypto assets.”
“It has made no sincere efforts to trace these crypto assets. By encouraging obscurity and having lax AML (anti-money laundering) norms, it has actively assisted Yellow Tune in laundering the proceeds of crime worth Rs 370 crore using the crypto route,” the ED said.
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