Ashish Singhal’s CoinSwitch Kuber Premises Raided By Enforcement Directorate (ED); Investigations Underway

In a series of raids targeting cryptocurrency platforms, the Enforcement Directorate (ED) raided at least 5 locations associated with CoinSwitch Kuber on August 26, 2022. The company, along with CoinSwitch Kuber CEO Ashish Singhal have stated that they are cooperating with the ongoing investigations. However, as the matter is sub-judice, more details could not be ascertained.

Why ED raided CoinSwitch Kuber?

ED is investigating alleged money laundering activities worth around Rs 1,000 crore. The case relates to a Chinese loan app network that used to extort money from users. It is estimated that thousands of people have been duped by these apps over the last four years. It is alleged that the scammers used popular cryptocurrency platforms such as CoinSwitch Kuber to launder the extorted money.

Chinese loan apps used to offer loans to people at very low interest rates. Some even had provision for 90-day interest-free period. However, before the loan was sanctioned, these apps asked full permission to access data like contact list, photos and videos and other private data. As soon as users said YES, their entire data was transferred to servers based in China.

After gaining access to their data, interest rates were suddenly raised to very high levels. As a result, users were not able to pay up their loans. Users were harassed and forced into paying money to the Chinese apps. Calls were also made to their friends and relatives, asking them to pay money. Photoshopped vulgar photos of the victims were also shared with friends and relatives to force users into paying more money.

In investigations, it was found that these apps were using cryptocurrency platforms and cryptocurrency exchanges to launder the extorted money. This could be the primary reason why ED has started investigating cryptocurrency platforms such as CoinSwitch Kuber.

Other cryptocurrency exchanges also raided

As it is possible that Chinese loan app scamsters were using multiple digital platforms to launder money, ED has raided around 10 cryptocurrency platforms till date. On August 5, ED raided cryptocurrency exchange WazirX, which is operated by Zanmai Lab Private Ltd. Bank account of one of the directors of the company was frozen by ED. The bank account had Rs 64.67 crore. It is alleged that WazirX has violated multiple RBI guidelines and other regulations.

On August 11, 2022, ED raided Flipvolt Technologies, which is operated by Singapore-headquartered Vauld. Assets worth Rs 370 crore ($46.4 million) were frozen during the raids. It is alleged that Rs 370 crore was deposited by around 23 entities, which was transferred to crypto wallets owned by Yellow Tune Technologies. Various violations were noted by the Enforcement Directorate such as no check on source of money, lax KYC norms, non-recording of transactions into Blockchains, conversion of fraud money into crypto assets, etc.

Based on ED investigations, it looks like cryptocurrency platforms have become a hub for laundering money. As conventional banking channels have become stricter, scamsters have started using cryptocurrency platforms to launder their illegally earned money. It is apparent that new laws are needed to curb such money laundering activities taking place on cryptocurrency exchanges.

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