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On the occasion of Diwali, 150 flats completed by National Buildings Construction Corporation (NBCC) in a stalled project of Amrapali were given to the homebuyers in a small ceremony organised with the help of court receiver.
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Indian cryptocurrency exchanges are blocking and reporting suspicious trades on their won following concerns raised by the government agencies that the virtual currencies were used for money laundering.
The industry is looking to self-regulate at a time when the government is yet to come out with any regulations around cryptocurrencies or the way to tax them.
WazirX, one of the largest cryptocurrency exchanges in the country, recently declared the numbers in what it calls a “transparency report”.
Between April and September this year, the exchange got 377 requests from legal enforcement agencies, out of which 38 requests were from foreign law enforcement agencies.
The crypto exchange locked about 1,500 accounts.
In all, the exchange locked 14,469 accounts, although most of them were after customers asked them to stop services or there were some other payment issues.
The exchanges have always claimed that if the cryptocurrency is based on a blockchain technology, all the records are permanent and, in fact, it would be easier to discover the exact nature of the transactions.
Enforcement Directorate notice
IN July, the Enforcement Directorate (ED) in its recent notice to WazirX, has asked the crypto exchange to explain why ‘withdrawal from crypto wallets’ is not a violation of the Foreign Exchange Management Act (FEMA).
The ED notice had put a question mark on the very essence of cryptos and fundamental structure of the underlying digital ledger, blockchain, that allow holders of cryptos to freely transfer coins from their wallets to another wallet and to anyone, anywhere in the world. The agency had asked WazirX to explain transactions worth 2,790.74 crore. A trader buying Bitcoin, the most popular cryptocurrency, on WazirX stores the coin in her wallet with the exchange.
However, she can move the crypto purchased on WazirX platform to another wallet with another exchange in India or abroad, or to her private wallet which is not linked to any exchange, or directly move coins to the wallet of another person who may be located anywhere.
WazirX and a few exchanges have also received notices from the income tax department which is trying to figure out the source of earnings of the bourses and whether parts have escaped tax.
In 2019, the Financial Action Task Force — an intergovernmental organisation to combat money-laundering — had come out with the ‘Travel Rule’ that prescribes exchanges, custodians as well as wallet providers to share information on senders and recipients of cryptos.
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The Enforcement Directorate has provisionally attached assets worth ₹578 crore of Wadhawan Global Capital (UK) in connection with the fraud at Uttar Pradesh Power Corporation Limited’s (UPPCL) provident fund which involves Dewan Housing Finance Corporation Ltd (DHFL).
WGC-UK is owned by Kapil Wadhawan and Dheeraj Wadhawan. “The attached assets are in the form of investment made by Wadhawans through WGC-UK in UK based companies,” the ED said in a statement on Tuesday.
The agency had initiated money laundering investigation on the basis of an FIR registered by Lucknow police against some officials of UPPCL for illegal investment of GPF and CPF funds of the employees in DHFL. This was in violation of the government’s notification and directives.
The investigation revealed that DHFL in connivance with UPPCL officials had illegally received ₹4,122.70 crore of GPF and CPF funds of UPPCL’s employees in fixed deposit in DHFL. Out of this, ₹2,267.90 crore of principal amounts is still outstanding to be paid by DHFL.
At this time, DHFL was also engaged in disbursing high value loans to its promoter related firms. All such unsecured loans had been sanctioned under directions of Kapil Wadhawan, who was then Chairman of DHFL and many such loans have turned non performing.
The investigation revealed that many of these loans had been siphoned off without being used for the purpose that they were sanctioned for.
Over ₹1,000 crore generated in this case has been siphoned off to UK by the Wadhawans through seven levels of layering and laundering through more than 30 beneficially owned and controlled Indian firms of Wadhawans.
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He is currently lodged in the Chanchalguda jail of Hyderabad after being arrested by the Telangana Police last month.
The ED searches were carried out on September 22 at six locations in Hyderabad and on various premises of Karvy group of companies, connected entities and the residential premises of C Parthasarathy, the agency said in a statement.
“Several incriminating evidences in the form of property documents, personal diaries, electronic devices, email dumps, etc have been seized and are being analysed,” it said.
“It is reliably learnt that C Parthasarathy is trying to off-load his shares in the group companies through private deals and thus, in order to preserve the proceeds of crime till further investigation, ED has issued a freezing order on September 24 and the estimated value of these shares has been arrived at Rs 700 crore as per the valuation for the year 2019-20,” it said.
These shares of the Karvy group are being held “directly and indirectly” by CMD Comandur Parthasarathy, his sons Rajat Parthasarathy and Adhiraj Parthasarathy, and their entities.
The ED case, filed under the criminal provisions of the Prevention of Money Laundering Act (PMLA), is based on a Telangana Police FIR alleging KSBL had “illegally pledged the securities of its clients and taken a loan of Rs 329 crore and diverted the same.”
“Another FIR has been registered by central crime station of Hyderabad Police for defrauding IndusInd Bank to the tune of Rs 137 crore and one more FIR has been registered by Cyberabad Police authorities for defrauding ICICI Bank to the tune of Rs 562.5 crore,” it said.
The ED has clubbed all these FIRs as part of its probe and has also recorded the statement of C Parthasarathy in jail.
KSBL under the leadership of C Parthasarathy had committed “gross irregularities” and all the illegally taken loans have become NPA, the agency said.
It is learnt that more FIRs are being registered by other banks and also individual shareholders/ investors, the ED said.
The total loan proceeds taken from multiple banks using the same modus operandi is around Rs 2,873 crore, it said, adding that the NSE and SEBI are also investigating the affairs of KSBL.
The agency said its probe found that KSBL “did not report” the depository participatory or DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE), in the filings made from January-August, 2019 with regulators/exchanges.
“KSBL fraudulently transferred shares belonging to its clients to its own demat account (which is not disclosed to the exchanges) and pledged the shares held in these accounts with the lenders/banks (HDFC bank, ICICI bank, IndusInd bank, Axis Bank, etc.).”
“The securities lying in the aforesaid DP account of KSBL, actually belonged to the clients who were/are the legitimate owners of the pledged securities,” the agency said.
It said KSBL did not have any legal right to create a pledge on these securities and generate funds.
“The quantum of such loans taken by KSBL from illegal pledge of shares is to the tune of Rs 2,873 crore. KSBL credited the funds raised by pledging of client securities to 6 of its own bank accounts (stock broker-own account) instead of the “Stock Broker-Client Account” and further has not reported these 6 own bank accounts (stock broker-own account) held with various private banks to the Sebi,” it alleged.
Prima facie, the ED said, a net amount of Rs 1,096 crore was transferred by KSBL to its group company–Karvy Realty (India) Ltd– between April 1, 2016 to October 19, 2019.
It accused KSBL of conducting “large-scale trading activities in the names of 9 companies that included Karvy Consultants Limited (KCL), which is a group company of Karvy, and 8 other shell companies, in the guise of doing insurance business.”
“Several crore of rupees were diverted for acquiring immovable properties through the group company, KRIL, and to other group companies as well.”
It also came to light that recently deletion of files and emails from the computer servers by using anti-forensic tools had been done, under the instructions of C Parthasarathy,” it claimed.
The bank statement analysis of these companies revealed that there is “large value rotation of funds” between the Karvy group companies and the bank accounts of certain shell companies.
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The Enforcement Directorate (ED) seized partly paid compulsorily convertible preference shares of HDIL group companies worth ₹233 crore in relation to the PMC Bank scam.
The PMC Bank scam came to light in September 2019. At least a dozen entities have been charge-sheeted so far for causing wrongful loss to the tune of ₹6,117.93 crore to PMC Bank, and a corresponding gain to themselves. HDIL Group’s promoters were considered to be the lead conspirators of the scam along with the bank’s then MD, Joy Thomas.
Also see: Enforcing contracts key to ‘ease of business’
Investigation under Prevention of Money Laundering Act 2002 (PMLA) revealed that in spite of default in payment, HDIL group companies availed loans from PMC from time to time. Now, the ED has attached partly paid Compulsorily Convertible Preference shares of HDIL group companies totalling to ₹233 crore under the provisions of Prevention of Money Laundering Act 2002 in PMC bank scam.
“On the strength of these shares, HDIL have right for allotment of under construction flats admeasuring 90,250 Square feet FSI in Ghatkopar, Mumbai of the developer M/s Aryaman Developers P Ltd. The developer has given an undertaking to ensure not to sell/transfer/alienate or create any third party rights thereon on completion of the project,” it said in a statement on Thursday.
The mode and manner of operation of bank accounts of HDIL clearly indicate the connivance of PMC Bank officials with the promoters of HDIL. There was misconduct on the part of PMC officials as they ignored all prevailing procedures to facilitate promoters of HDIL by extending unusual credit facility. Instead of declaring them as NPA for initiating actions for recovery, the PMC bank officials choose to accommodate the HDIL group.
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This is the second arrest in this case after his sister V Hima Bindu, the “prime accused” and managing director of a city-based telecom equipment manufacturing company VMCSL, was taken in custody by the ED earlier this month.
“Although V Satish Kumar claimed that he had no link with the non-performing asset (NPA) of VMCSL, more than 40 hard disks of this company were recovered from his residence during the search carried out on July 20.”
“On forensic examination of the digital devices, it was found that he (Satish Kumar) indulged in benami transactions and was involved in efforts to transfer fraud amounts to off-shore entities,” the ED alleged in a statement issued here.
He was, it claimed, non-cooperative during the investigation and was not supplying documents of his own business entities on one pretext or the other.
The ED case of money laundering against VMCSL and its promoters is based on a CBI FIR earlier filed against them.
“VMCSL had taken loans from a consortium of banks and the present dues outstanding to all the banks is Rs 3,316 crore.”
“Forensic audit revealed that VMCSL circulated loans to various related entities to inflate its books of accounts,” the ED had alleged earlier.
It said the audit also revealed that its related entity PISL was given 3 per cent commission by VMCSL for all receipts from BSNL “without any specific role” of PISL in BSNL tenders.
“Forensic audit found VMCSL had opened various Letters of Credit worth Rs 692 crore in the name of fake or dummy entities which were subsequently devolved,” it alleged.
Bindu, the ED had claimed, through her company VMCSL and with the “active assistance” of her brother V Satish Kumar, in order to dodge the banks, created false and exaggerated operational revenues by generating fake sales and purchase invoices through the companies controlled by their directors and family members.”
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Thapar, 60, was remanded in one-day custodial interrogation of the ED by a local court on Wednesday, after being arrested the previous night following raids by the agency against his businesses in Delhi and Mumbai.
In its remand paper, the agency alleged that “illegal favours are found to have been extended by Yes Bank to Avantha Group”. “Any quid pro quo for extending such illegal benefit is yet to be ascertained,” said the document, a copy of which was seen by ET.
The court sought the complete case file and the enforcement case information report, equivalent to a first information report (FIR), registered by the agency against Thapar and others in June. The agency had sought 14 days of remand.
The ED had filed a case under the Prevention of Money Laundering Act on the basis of an FIR filed by the Central Bureau of Investigation (CBI) which accused Thapar and others of defrauding Yes Bank.
The remand paper said that the ED probe had revealed money laundering through Oyster Buildwell Pvt Ltd (OBPL), Jhabua Power Limited (JPL), Jhabua Power Investment Ltd (JPIL), Avantha Power & Infrastructure Ltd (APIL), Avantha Realty Ltd and other entities “controlled and beneficially owned directly or indirectly” by Thapar.
It said that “sham agreements were made by these entities to fraudulently obtain huge amount running into more than Rs 500 crore from Yes Bank and further by different modes of layering the tainted amount was laundered and the loan account thus turned NPAs causing a loss of huge public money”.
Thapar’s counsel, Vijay Aggarwal, however said that his client was the “victim” in this case and that the said sham agreements were executed by Yes Bank executives to secure “valuable shares” of Thapar’s companies. He claimed that Thapar had also complained against the Yes Bank executives but no investigative agency had taken cognisance of the matter.
Aggarwal produced an email purportedly sent by a Yes Bank executive to show that the so-called sham agreements were “forced upon” Thapar’s group of companies. He further claimed that the entire transaction had taken place because Yes Bank wanted to ensure “evergreening of loans”.
The ED informed the court that Thapar’s statements were recorded twice in July and once on Tuesday, and that he allegedly “misled” the investigators.
“JPL entered into a sham operations and management agreement for its thermal power project with its group company namely JPIL for a monthly consideration of Rs 7.5 crore and JPIL entered into a further sham sub-contract for the same work with OBPL for a monthly consideration of Rs 15 crore,” alleged the remand paper.
It said that “to give a plausible justification and explanation for seeking of loan, a special clause related to provision of an interest free security deposit to be kept by OBPL to JPIL to the tune of Rs 514.27 crore was added in the non-genuine agreement executed between JPIL and OBPL which was sought as loan from Yes Bank”.
The agency alleged that OBPL is a paper company with no business activity. “The company had no employees working in it and has just held landholdings in its name,” said the remand paper.
The ED claimed that two directors of OBPL have “confirmed” to the agency that OBPL is a paper company. “And that OBPL had no prior experience of handling O&M work of thermal power plant. Neither was any service given by OBPL to JPIL with regard to the O&M agreement nor was any consideration paid by JPIL to OBPL,” said the remand paper.
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He will be produced before a local Court on Wednesday where ED will seek his custodial interrogation. As per available information, ED had raided premises of Gautam Thapar on Tuesday.
The federal agency had launched a money laundering probe on the basis of an FIR registered by the Central Bureau of Investigation (CBI) against Gautam Thapar and others for allegedly defrauding Yes Bank.
The CBI had booked Thapar and others including their Directors/Promoters and unknown persons of private companies/bank officials for causing an alleged loss of Rs. 466.51 crore (approx) to Yes Bank.
Those booked by the CBI included M/s Oyster Buildwell Pvt. Limited, Gurugram and its holding company M/s Avantha Realty Ltd., its Directos/promoters viz. Raghubir Kumar Sharma, Rajendra Kumar Mangal, Tapsi Mahajan, Gautam Thapar and unknown officials of private companies/bank.
It was alleged that Avantha Realty had availed a term loan facility of Rs. 515 crore (approx) from Yes Bank Limited in December, 2017. The loan amount was declared as NPA on October 30, 2019.
Further, the borrower was allegedly declared ‘Red Flagged Account’ on March 6, 2020 on the basis of Early Warning Signals (EWS). It was also alleged that the accused including said private company & its Holding Company, its Directors/promoters and others committed breach of trust, cheating, criminal conspiracy, forgery for diversion/misappropriation of the public money during the period from 2017 to 2019, thereby causing loss to the tune of Rs. 466.51 crore (approx) to Yes Bank, as per CBI’s FIR.
It might be mentioned here that last year the CBI had registered an FIR against Gautam Thapar and Avantha Group. The said FIR, registered in March last year, alleged criminal conspiracy, cheating, and obtaining illegal gratification against Rana Kapoor, former Managing Director of YES Bank and his kin.
“It was alleged that Rana Kapoor conspired with the others named in the FIR to obtain illegal gratification in the form of a bunglow at Amrita Shergill Marg, New Delhi, by paying only Rs 378 crore (approximately) through Bliss Abode Private Limited, where Rana’s wife was one of the two directors,” said the CBI FIR registered last year.
“This property was immediately thereafter mortgaged to India Bulls Housing Finance Limited for a loan of ?685 crore (approximately). It was further alleged that much less consideration than the market value was paid to Avantha Realty Ltd for relaxation in other existing loans of Avantha Group of companies and for advancing new/additional loans to Avantha Group of companies,” the FIR added.
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The ED notice puts a question mark on the very essence of cryptos and fundamental structure of the underlying digital ledger, blockchain, that allow holders of cryptos to freely transfer coins from their wallets to another wallet and to anyone, anywhere in the world.The agency had asked WazirX to explain transactions worth 2,790.74 crore. “These were carried out in violation of forex rules. WazirX’s platform allowed clients to transfer cryptocurrencies without proper documentation, making it a route for laundering,” said an official.
“Since money has crossed borders, the law of the land applies and one needs to be sure that this money isn’t cheap money (cheap money is low-interest loan) or dirty money (used for illegal activities),” said an ED official.
A trader buying Bitcoin, the most popular cryptocurrency, on WazirX stores the coin in her wallet with the exchange. However, she can move the crypto purchased on WazirX platform to another wallet with another exchange in India or abroad, or to her private wallet which is not linked to any exchange, or directly move coins to the wallet of another person who may be located anywhere.
“WazirX, like other exchanges, may be doing the KYC of traders and investors who have accounts and wallets with it. If any of these traders withdraws a few Bitcoins, WazirX would also know the ‘address’ of the external wallet where the Bitcoins are sent. But it can never know the identity of the person or the entity owning the other wallet which receives the Bitcoin. Knowing the address of the wallet is not the same as knowing the people behind the wallet. This is the very nature of cryptos,” said an industry person.
“The exchange has claimed they have done KYC, but that isn’t enough to ensure that the digital currency isn’t misused. In the absence of any official digital currency and regulation, there have been instances of Bitcoins being used to buy drugs on the dark net as well as for money laundering,” the ED official added.
WazirX and a few exchanges have also received notices from the income tax department which is trying to figure out the source of earnings of the bourses and whether parts have escaped tax.
WazirX CEO and founder Nischal Shetty declined to comment on the matter. The exchange, it is believed, is yet to respond to the ED notice.
The central agency had served the notice to WazirX in June after it stumbled upon information on crypto withdrawals and receipts in the course of an ongoing investigation into Chinese-owned online illegal betting applications. ED, in a June 11 press release had said the Rs 800-crore crypto inflow and Rs 1400-crore crypto outflow were not available on the blockchain.
“While the present investigation is linked to WazirX, ED’s approach and line of questioning could eventually involve other exchanges. Traders on all exchanges are free to transfer cryptos to other wallets… However, we have not received queries or asked to share data on outflow-inflow into wallets,” said an official with another exchange.
Many in the fintech world may argue that ED is wrongly comparing crypto transactions with banking transactions. “A bank or the regulator can find out the details of suspicious accounts. But the essence of cryptos, which aims to bypass the banking system, is anonymity and privacy,” said another person.
However, the concern over fund movements in the garb of cryptos is being voiced by regulators world over. In 2019, the Financial Action Task Force — an intergovernmental organization to combat money-laundering — had come out with the ‘Travel Rule’ that prescribes exchanges, custodians as well as wallet providers to share information on senders and recipients of cryptos.
“It may be easy to implement this among exchanges within a country even if they are competitors. But to enforce this across the world among exchanges and service providers with servers located in different jurisdictions can be a big challenge. Also, it’s difficult to track debits and credits in private wallets which are available on mobile phones and other devices,” said a fintech official.
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Banks have now recovered 58 per cent of the amount they were defrauded by Vijay Mallya, Nirav Modi and Mehul Choksi. While the SBI-led consortium got another ₹792.11 crore from sale of shares held in Mallya’s Kingfisher airline, other banks have got ₹1,060-crore assets from the Fugitive Economic Offences Court in the PNB-Nirav Modi Case
The Enforcement Directorate on Friday said while the public sector banks were defrauded of ₹22,585.83 crore, recovery and transfer of assets as of date total ₹12,762.25 crore. The ED has attached assets worth ₹18,217.27 crore under the provision of the Prevention of Money Laundering Act from the three fugitives.
“Today, the SBI-led consortium has realised ₹792.11 crore by sale of shares in Kingfisher Airlines/Vijay Mallya case. These shares were handed over by the ED to the consortium. Earlier, SBI led consortium had realised ₹7,181.50 crore by liquidating assets handed over to it,” said an ED statement.
A few days back, the ED had handed over ₹3,728.64-crore assets to the SBI-led consortium including shares of ₹3,644.74 crore, Demand Draft of ₹54.33 crore and immovable properties worth ₹29.57 crore.
Nirav Modi and his uncle Mehul Choksi are wanted by India for defrauding Punjab National Bank (PNB) of over ₹14,000 crore. They fled the country in January 2018 before their scam of using fake Letters of Undertakings (LoUs) to cheat the bank came to light.
Vijay Mallya had fled to the UK in 2016 after his Kingfisher Airlines collapsed. Mallya had borrowed to keep the consistently loss-making airline in air. By 2012, Kingfisher was declared an NPA by SBI. Accused of fraud and money laundering, Mallya owes 17 Indian banks about ₹9,000 crore.
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