ED Cracks Down on Major Crypto Scam with Arrests in Chennai

The Enforcement Directorate's Chennai branch arrested two individuals involved in a digital scam utilizing mule accounts to launder money into cryptocurrency and transfer it overseas. Following a complaint of a Rs 33 lakh fraud, the ED uncovered a complex network across various states, implicating fintech companies for non-compliance with KYC norms.

The Directorate of Enforcement (ED) in Chennai has made a breakthrough in a complex 'digital arrest' scam, arresting two individuals suspected of defrauding people by utilizing mule accounts. The accused allegedly transformed illicit cash into cryptocurrency, which was then transferred overseas, the ED has revealed.

The investigation, initiated after a senior citizen reported a loss of Rs 33 lakh to the Chennai Police, found that the suspects had crucial roles in manipulating mule accounts and in the subsequent international transfer of converted cryptocurrency. One suspect was detained in Kolkata and another in Delhi, the ED stated.

Cash Deposit Machines (CDMs) were allegedly misused by the suspects to deposit money into fintech service accounts, which was then funneled into individual accounts to purchase cryptocurrency. This cryptocurrency was reportedly used to obscure and transfer the proceeds of crime abroad with the aid of accomplices using foreign contacts.

The ED's probe has mapped an intricate network of mule bank accounts used for redirecting fraudulent funds. In connection with this, searches were conducted at over 20 locations spanning states like West Bengal, Madhya Pradesh, Uttar Pradesh, Gujarat, and Maharashtra.

During the operations, multiple mobile phones, laptops, and other electronic devices packed with incriminating evidence were confiscated. The seized items included cryptocurrency such as BTC and USDT, highlighting a sophisticated setup deployed to move money illicitly.

The ED disclosed that a significant volume of the funds, sourced from various digital frauds, were routed through these methods, often flouting Know Your Customer (KYC) norms. Several fintech companies are now under scrutiny for taking cash deposits from suspicious entities without verifying their legitimacy.

The revelation brings to light significant failures by fintech firms in adhering to KYC regulations, with substantial amounts of presumably tainted money trickling through financial systems unchecked. The ED continues to investigate the roles of these companies, alongside their distributors, retailers, and related bank accounts.

(With inputs from agencies.)