This is how a Rs 2 Lakh employment scam exposed Rs 3,000 Crore money laundering through cryptocurrencies

Law enforcement was tracking a simple Rs 2 lakh employment scam in Bareilly. They found a courier trail in the process, which revealed that Rs 3,000 crore of this racket had already been siphoned off to countries like China and the Philippines using cryptocurrency wallets like Binance, Smart Cont, OK Corner, etc. The big question now is how do I get the money back?

It all started in Bengal

The Uttar Pradesh Cybercrime Department has arrested a West Bengal man linked to the Bareilly cyberfraud case. The accused, identified as Manzurul Islam, was arrested for defrauding a Bareilly woman of Rs. 2.1 lakh in October 2021.

Triveni Singh, Superintendent of Police (SP), Cybercrime, UP, said: “The accused asked the victim to click on a link and register for the post for Rs 100 only. The woman was then offered Rs 200 in exchange for an investment of Rs 100, and an electronic wallet was created. Over a period of few days, the woman continued to invest money and eventually found out that she had been cheated out of more than Rs 2 lakh.

Singh said these scammers sent hundreds of thousands of bulk SMS/WhatsApp across India in one day, and several people fell prey to this fraud. It started during the first Covid-19 pandemic lockdown in the country when people were looking for a work-from-home opportunity or had lost their jobs and were looking for a new one.

Crypto money laundering

The investigation revealed that this money was transferred to three different UPI IDs, and the amount was more than Rs 3,000 crore. Singh said the entire amount was then converted into cryptocurrency by creating wallets on Binance, Smart Cont, OK Coin, BitPie, etc. Furthermore, money was also transferred using different trusts, companies and NGOs.

“So far, investigations revealed that 256 wallets of different cryptocurrencies were used to transfer Rs 1,413 crore, including six wallets in India, while other wallets were created in China, Malaysia and the Philippines. In addition, the bank accounts of no less than 46 companies, trusts and businesses have been used to transfer more than Rs 1,500 crore. Twelve of them are shell companies,” he explained.

Singh further added that an investigation is underway to determine the extent of this link in India and how it works.

Recover money – is it even possible?

Rohas Nagpal, Chief Blockchain Architect at Hybrid Finance (HyFi) Blockchain, said that as soon as money leaves an address controlled by the exchange, it becomes difficult to trace it.

“If something like Bitcoin is used by criminals, it is pseudo-anonymous and can always be traced. But, many savvy criminals are now using Monero – these are the privacy coins. If it is used, it becomes almost impossible to find it. As soon as something enters a Monero address, it disappears,” Nagpal said.

“As long as it’s a bank account, we still have agreements with various countries and things can be tracked, but for crypto – so far there’s nothing,” Nagpal added.

Legal remedies

Prashant Mali, a cybercrime and privacy lawyer, said the legal remedies in these cases are long and tenuous.

“We have to go through the Mutual Legal Assistance Treaty (MLAT) under which the police have to act to seal the accounts first. Then launch a police/judicial investigation depending on the jurisdictions where the money is parked. And then, if that court finds the money from the proceeds of the fraud, it can order that the money be returned to the Indian police force. Then the victims in India can go to the court where the case is filed and apply for restitution of the property and get their money back,” Mali said.

“But the problem with that is that you never know if the money is still lying around in said accounts. Catching cyber fraudsters and getting their money back are two different things. So maybe it’s a big deal which we have resolved, but who will return that money to the victim is not an established pattern here. There is a big gap in the law,” Mali added.

Indian government concerned about crypto

Finance Minister Nirmala Sitharaman, during an interaction at Stanford University on Thursday, reiterated the need for comprehensive global cryptocurrency regulation and said India would not be rushing to introduce regulations on the use of cryptocurrencies.

“So our intention is in no way to harm that (the innovation around crypto)…but we have to define it for ourselves,” she said, adding that crypto- currencies can also be manipulated for money laundering or terrorist financing.

At the International Monetary Fund (IMF) Spring Meeting earlier this month, Sitharaman said India was concerned that cryptocurrencies and blockchain-based technologies could be used for money laundering.

“Regulation cannot be made by a single country on its own ground by an efficient method. And to do it across borders, technology has no solution that is acceptable to different sovereigns and, at the same time, applicable in each of the territories,” Sitharaman said.

Upcoming surveys

According to Singh, the role of the bulk SMS provider/SMS aggregator and telecom operator is currently under intense scrutiny.

Before sending, each bulk message header is approved and the communication is reviewed, according to Singh, but somehow these criminals got different messages approved but sent something else.

Police are investigating whether or not this is a violation of the rules of the Telecommunications Regulatory Authority of India (TRAI).

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