The Enforcement Directorate (ED) has arrested a cryptocurrency trader in connection with its money laundering probe linked to an online Chinese betting scam case that is estimated to be over Rs 1,100 crore, the central agency said on Friday.
It said Naisar Kothari, a resident of Bhavnagar in Gujarat, was arrested under sections of the Prevention of Money Laundering Act (PMLA) and he has been sent to the ED custody till December 22 by a court.
The case came to light after the agency conducted multiple raids across the country in August at the registered offices of some companies, their directors and chartered accountants who were stated to be involved in illegally running online betting apps on websites which are hosted from outside India and some Chinese nationals operated them.
The agency, in a statement, said “Kothari had purchased USDT cryptocurrency on behalf of an accused company and had transferred them to unknown wallets on foreign exchanges.”
“It was found that Kothari had knowingly and actively involved himself in layering the proceeds of crime and hence he was arrested…,” it said.
The ED’s PMLA case is based on a Telangana Police FIR that was filed against Dokypay Technology Private Limited, Linkyun Technolgy Private Limited and others and the police had also arrested 3 people including a Chinese national.
The three were later arrested by the ED too under criminal sections of the anti-money laundering law.
The police case was filed after a person lodged a complaint that he had lost money by investing in a betting app (application).
“Subsequent investigation revealed that apart from providing payment aggregator re-seller services to banned apps in India, these Chinese-owned companies were indulging in international hawala and illegal activities,” the ED claimed.
“Login credentials and dongles for HSBC bank accounts and payment aggregators like Paytm, Cashfree, Razorpay etc were shipped to China and were being operated from there,” the agency claimed.
The agency detected that “large amount of money was being inexplicably transferred to some cryptocurrency traders based in Bhavnagar” that included Kothari.
It had earlier said that these companies moved crores of funds across the shores by using “lax regulatory” mechanism of online wallets.
“Initially, dummy Indian directors were used to incorporate the companies and after some time Chinese nationals travelled to India and took directorship in these companies,” it had said.
The agency, after conducting the raids, had said it found some locals were hired and “used to open bank accounts with HSBC Bank and open trade accounts with online wallets namely Paytm, Cashfree, Razorpay, etc.”
The agency had alleged in a statement that these “online wallets had lax due diligence mechanisms and their non-reporting of suspicious transactions to the regulatory authorities helped the accused companies to launch pan-India operations.”