The Enforcement Directorate (ED) has frozen assets worth Rs 370 crore in bank balances, payment gateway balances and crypto balances of Flipvolt Crypto currency exchange held by Bengaluru-based firm Yellow Tune Technologies Private Limited, which was allegedly used by Chinese fintech app firms to launder their India Revenue.
The ED reported the seizures on Friday after searches conducted at the premises of Yellow Tune Technologies in Bengaluru.
“Following criminal investigations into Chinese fintech apps operating in India, many of the app operators had laundered funds through cryptocurrency with Flipvolt Cryptocurrency before closing shop in the country,” the ED said on Friday.
A statement from a central agency read: “While investigating fund trail, the ED found that large amounts of funds worth Rs 370 crore were deposited by 23 entities, including accused NBFCs and their fintech companies, in the INR wallets of M/s Yellow Tune Technologies Private Limited held with Crypto Exchange M/s Flipvolt Technologies Private Limited.”
“These amounts were nothing but proceeds of crime stemming from predatory lending practices. Purchased cryptocurrency was transferred to various unknown foreign wallet addresses. Furthermore, searches were conducted at various premises of M/s Yellow Tune Technologies Private Limited from 08/08/2022 to 08/08/2022. 2022 to find the beneficial owners of this company and the beneficiary’s wallets,” the ED said.
“But the promoters of the company are untraceable. It is found that this shell entity was incorporated by Chinese nationals Alex and Kaidi (real names not known) with the active knowledge of willing CAs/CS and the bank accounts were opened in the name of the dummy directors,” ED added.
The Chinese who run the fintech apps left India in December 2020 and the bank credentials and digital signatures of dummy directors were sent abroad and were used by them to launder the funds raised in India, the ED said. Funds of Rs 2.31 crore belonging to Yellow Tune Technologies itself have been seized, the agency said.
“Yellow tune using assistance from Flipvolt Crypto-Exchange which has very lax KYC norms, no EDD mechanism, no check on source of depositor’s funds, no mechanism to raise STRs etc. helped the accused fintech companies with avoiding regular banking channels, and easily managed to withdraw all the fraud money in the form of crypto-assets,” the ED said in its official statement on the investigations.
“Furthermore, despite repeated opportunities, Flipvolt Crypto-exchange failed to provide the complete trace of crypto transactions done by M/s Yellow Tune Technologies Private Limited. It also failed to provide any form of KYC of counterparty wallets,” the ED added .
“The lax KYC norms, the loose regulatory control of allowing transfers to foreign wallets without asking any reason/declaration/KYC, failure to record transactions on blockchains to save costs have ensured that Flipvolt is unable to account for the missing crypto assets. . It has not made any sincere efforts to trace these crypto assets,” the ED said.
“By encouraging obfuscation and having lax AML norms, it has actively helped M/s Yellow Tune to launder the proceeds of crime worth Rs 370 crore using the crypto route. Hence, corresponding movable assets to the extent of Rs 367.67 crore are frozen Crore held by Flipvolt Crypto exchange in the form of Bank and Payment Gateway balances worth Rs 164.4 Crore and Crypto assets held in their pool accounts worth Rs 203.26 Crore, under PMLA, 2002, till complete fund trace is provided of the crypto exchange,” the ED added.