ED Freezes Funds in Chinese Loan Apps; Raids PayTm & Others

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ED Freezes Funds in Chinese Loan Apps; Raids PayTm & Others

The Enforcement Directorate freezes cash totaling INR 46.67 crore stored in payment gateways like Paytm, Easebuzz, Razorpay, and Cashfree as part of a crackdown on loan apps and investment tokens controlled by the Chinese government.

The Enforcement Directorate (ED) conducted searches against Chinese-controlled loan apps and investment tokens on September 14 in Delhi, Mumbai, Ghaziabad, Lucknow, and Gaya, all under the Prevention of Money Laundering Act (PMLA).

The Indian federal investigative agency also raided 16 premises of banks and payment gateways in Delhi, Gurugram, Mumbai, Pune, Chennai, Hyderabad, Jaipur, Jodhpur and Bengaluru in search of HPZ app-based token as per a money laundering case reported from an October 2021 FIR filed by the cybercrime unit of Kohima Police in Nagaland. In the search, ED seized various incriminating documents.

As ED freezes funds in Chinese loan apps with the Indian Payment Gateway companies, large deposits have been spotted. With Easebuzz Private Limited, Pune, Rs 33.36 crore; Razorpay Software Private Limited, Bangalore, had Rs 8.21 crore; Cashfree Payments India Private Limited, Bangalore, had INR 1.28 crore; and Paytm Payments Services Limited (NSE: PAYTM), New Delhi had Rs 1.11 crore.

An app-based service, HPZ Token, promised users a high return on investment (ROI) after mining the token using specialized hardware. Bitcoin and other cryptocurrencies fall under this category. Using the promise of a 100 percent return on investment through the app HPZ Token, the developers of this app dupe unsuspecting users into making investments with them.

The recipients of these funds could access them via UPIs and many other payment mechanisms, nodal accounts, and persons. Part of it was distributed to investors, while the rest was redirected to other bank and PG accounts belonging to people and businesses. Initially, some of this money disappeared in the form of virtual currencies. As a result, the payments were halted, and the website was taken down, according to ED.

In context to this raid by the Enforcement Directorate (ED), Paytm informed that, as mentioned in its exchange filing, “ED instructed Paytm to freeze certain amount from MIDs of specific merchant entities and none of these funds belong to Paytm or our group companies.”

As ED freezes funds in Chinese loan apps, following Paytm, Easebuzz stated that none of the parties mentioned in the ED’s statement belonged to our merchant base. The entities mentioned by authorities were only the counterparties of the merchant who was using our payment gateway. This merchant had been proactively identified and blocked by Easebuzz before the investigation started, per our internal risk and compliance process.

Here, Cashfree Payments could easily provide the required and necessary information to the ED in a few hours on the day of inquiry. The operations and onboarding processes of Cashfree Payments were compliant with existing regulations.

Razorpay proactively blocked all those suspicious entities and funds associated with a few who conducted illegal business through multiple payment gateways/banks about 1.5 years ago. They have shared their details with the ED authorities. Funds ordered to be frozen do not belong to Razorpay. The brand clarifies that it will continue to maintain strict operations and onboarding processes to adhere to the highest standards of governance & regulatory guidelines.

As ED freezes funds in Chinese loan apps, shares of One97 Communications, the parent company of Paytm, take a 6 percent dip in Friday’s trade. The stock falls 6 percent to a daily low of INR 686.85 a share on the NSE. Last week, the stock regained some losses and was down 3 percent. The stock has dropped as much as 47 percent year-to-date. The stock eventually recovered losses to close the day at INR 717.40, down less than 2%. ♦

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