ED raids 21 premises in multiple States in Karnataka’s crypto fraud case

The Directorate of Enforcement (ED), conducted search operations at 21 premises across Karnataka, Maharashtra and Delhi on December 18 in connection with a large-scale cryptocurrency investment fraud case in Karnataka.

The searches were carried out under the provisions of the Prevention of Money-Laundering Act (PMLA), 2002, in the case registered against 4th Bloc Consultants and other accused.

Residential and office premises of the accused and their associates were searched, ED said on Monday.

According to the agency, the action followed a preliminary investigation based on an FIR and inputs shared by the Karnataka State Police, which alleged an organised financial fraud involving cryptocurrency-based investment platforms.

The accused are alleged to have targeted Indian citizens as well as foreign nationals, collecting funds under the guise of high-return investments, primarily in the form of virtual assets.

During the searches, the ED unearthed a detailed modus operandi allegedly used by the accused.

The accused created fake cryptocurrency investment platforms mimicking genuine websites and advertised exorbitant returns. These fake platform targeted gullible investors in India and abroad by promising quick profits, while misusing photographs of reputed crypto experts and well-known personalities without their consent. They paid small returns to early investors to gain trust and attract more participants, similar to a multi-level marketing (MLM) scheme.

They also offered referral bonuses and extensively used social media platforms such as Facebook, Instagram, WhatsApp and Telegram to promote the schemes. They allegedly created multiple crypto wallets, foreign bank accounts and shell companies to collect proceeds of crime (PoC). They also allegedly routed funds to India through hawala channels, accommodation entries and peer-to-peer (P2P) crypto transfers.

They allegedly utilised the proceeds of crime to create assets in India and abroad. The ED said that the accused have been allegedly using this modus since 2015. The proceeds of crime generated in the form of cryptocurrency were either used directly in crypto transactions or converted into cash and bank balances through P2P transfers using various crypto platforms, ED said in its statement on Monday. The ED further said that the proceeds were used to acquire movable and immovable properties both in India and overseas. Some of these properties have been identified during the search operations.

Investigators have also identified several crypto wallet addresses allegedly used by the accused to receive and further launder the proceeds of crime. It was revealed that most of the accused were maintaining undisclosed foreign bank accounts and foreign entities to facilitate money laundering, ED said.