Digital Asset Fraud, India, China

India’s financial unit freezes $1.2M funds from Chinese entities over suspected digital asset fraud

India’s Enforcement Directorate (ED), the country’s agency investigating economic crimes, announced that it had frozen the funds belonging to a bevy of Chinese companies.

The foreign entities allegedly promoted a fraudulent investment scheme involving digital assets. The statement from the ED noted that the activity involved “HPZ,” an app-based token, and promised investors huge returns on deposits.

Roped by the allure of double-digit gains in months, hundreds of Indians fell for the scam that also pledged to “invest in mining machines for Bitcoin and other cryptocurrencies.” However, the firms failed to keep their end of the bargain and misappropriated the funds for other uses.

The report noted that ED froze $1.2 million across various Indian bank accounts of the Chinese firms. The state-run agency confirmed that this was the first bust of the syndicate’s operation. A search on September 14 led to the confiscation of $5.7 million, bringing the total amount to $6.9 million.

The offending entities include Comein Network Technology Private Limited, Magic Bird Technology Private Limited, Acepearl Services Private Limited, and Larting Private Limited, among others. Further investigation revealed that the companies were involved in the control of “suspicious” money lending apps and had service agreements with non-banking financial firms.

The ED has been ramping up efforts to sanitize India’s digital assets industry from bad actors. In August, it was announced that the agency was investigating nearly 10 exchanges for money laundering to the tune of $125 million. It went ahead to freeze $8 million worth of assets belonging to WazirX, the country’s largest exchange.

The rising spate of digital asset fraud

The activities of bad actors in the space have cast a dark cloud over the future of the virtual currency ecosystem. While prices soared during the 2021 bull run, there was a spike in the spate of fraud involving the use of digital assets.

Analysts have attempted to rationalize the increase, noting that new investors flocked to the industry on the backs of quadruple-digit gains that tokens like Shiba Inu (SHIB) and Dogecoin (DOGE) attained during the rally. However, the recent lull in prices may have deterred new investors, but bad actors are turning to hacking protocols and wallets.

In the United States, Delaware’s Department of Justice has frozen the holdings of entities involved in romance scams that used virtual assets called “pig butchering.” The freezing was hailed as a strong commitment by the regulator to control the industry that has earned the appellation of being the Wild West.

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