ED Conducts Searches in Crypto Investment Fraud Case Involving 4th Bloc Consultants.

Headnote:

The Directorate of Enforcement (ED), Bangalore Zonal Office, conducted search operations at 21 locations across Karnataka, Maharashtra, and Delhi under the Prevention of Money-Laundering Act, 2002, in connection with a large-scale organised financial fraud involving cryptocurrency-based investment platforms. The investigation revealed a long-running Ponzi-style scheme using fake crypto investment websites to defraud Indian and foreign investors, with proceeds laundered through crypto wallets, foreign bank accounts, hawala channels, and shell entities.

Background:

• ED initiated preliminary investigation based on an FIR and intelligence inputs shared by the Karnataka State Police.

• The allegations pertain to organised financial fraud through cryptocurrency (virtual digital asset) investment platforms operated by the accused persons.

• The accused allegedly targeted Indian citizens as well as foreign nationals, collecting funds in the guise of high-return investments, primarily in cryptocurrency.

• The fraudulent schemes were executed through multiple websites designed and controlled by the accused.

Findings During Search Operations

• The accused created fake cryptocurrency investment platforms mimicking legitimate platforms and advertised unrealistic, astronomical returns.

• Gullible investors were targeted using social media platforms such as Facebook, Instagram, WhatsApp, and Telegram, along with referral bonus schemes.

• Photographs of reputed crypto experts and well-known personalities were allegedly used without consent to promote the schemes.

• Early investors were paid limited returns to gain trust and attract further investments, resembling a classic MLM/Ponzi structure.

• Multiple crypto wallets, foreign bank accounts, and shell companies were created to collect and route the Proceeds of Crime (POC).

• Funds were transferred to India through hawala, accommodation entries, and peer-to-peer (P2P) crypto transfers.

• Proceeds of Crime generated since 2015 were either utilised directly in crypto transactions or converted into cash and bank balances via P2P platforms.

• The laundered funds were used to acquire movable and immovable properties in India and abroad.

• Several such properties have been identified during the search proceedings.

• ED also identified crypto wallet addresses used by the accused to receive and further launder the Proceeds of Crime.

• It was revealed that most of the accused maintained undisclosed foreign bank accounts and foreign entities for laundering illicit proceeds.

Status of Investigation:

• Further investigation in the matter is currently under progress.