ED freezes assets worth ₹370 cr of Bengaluru firm

The Enforcement Directorate (ED) on Friday said it has conducted searches at various premises of a private company in Bengaluru and froze assets worth ₹370 crore.

According to ED, a large amount of funds to the tune of ₹370 crore were deposited by 23 entities including accused NBFCs and their fintech companies into the INR wallets of Yellow Tune Technologies held with crypto exchange Flipvolt Technologies Private Limited. These amounts were nothing but proceeds of crime derived from predatory lending practices. Cryptocurrency so purchased was transferred to various unknown foreign wallet addresses, ED said.

Further, searches were conducted at various premises of Yellow Tune Technologies Private Limited between August 8-10 in order to locate the beneficial owners of this company and that of the recipient wallets. But the company's promoters went untraceable.

ED said this shell entity was incorporated by Chinese Nationals Alex and Kaidi with the active connivance of willing CAs/CSs and the bank accounts were opened in the name of dummy Directors. These Chinese nationals left India in December 2020 and later the Bank internet credentials, digital signatures of dummy Directors etc were shipped abroad and were used by the said Chinese nationals to launder the proceeds of crime. ED could trace the assets of Yellow Tune to the extent of ₹2.31 crore and has issued the freezing order under PMLA, said the probing agency.

Yellow Tune by using the assistance of Flipvolt Crypto-Exchange which has very lax KYC norms, no EDD mechanism, no check on the source of funds of the depositor, no mechanism of raising STRs, etc 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, ED said.

Furthermore, despite giving repeated opportunities, Flipvolt Crypto-exchange failed to give the complete trail of crypto transactions made by Yellow Tune Technologies. Nor could it 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, said ED.

The agency further said by encouraging obscurity and having lax AML norms, Flipvolt has actively assisted Yellow Tune in laundering the proceeds of crime worth ₹370 Crore using the crypto route. Therefore, equivalent movable assets to the extent of ₹367.67 Crore lying with Flipvolt Crypto-exchange in the form of Bank and payment gateway balances worth ₹164.4 crore and crypto assets lying in their pool accounts worth ₹203.26 crore, are frozen under PMLA, 2002, till complete fund trail is provided by the crypto-exchange.

Further investigation is underway.