ED Launches Probe into Mobile App Fraud

Enforcement Directorate (ED) has launched a money-laundering investigation into a mobile phone app fraud with Chinese connections that has cases registered in several states. The controllers of the scam allegedly used a network of over two dozen shell companies to distribute the fraudulent money. The apps had first given a minimum payout of 10% to tempt investors and promised investors appealing investment returns to cover their tracks.

What is the mobile phone app fraud?

In the Power Bank app case, where victims lost their investments, Chinese nationals are accused of syphoning off public funds worth a few hundred crore rupees. This is referred to as mobile phone app fraud. The Power Bank app represented itself as a Bengaluru-based start-up, but an investigation later revealed it was in China.

Are there more questionable companies?

Almost 100 companies reportedly controlled by the Chinese accused individuals are being investigated by the ED. Via social media messaging services, the claimed controllers would contact individuals to recruit their partners among those who expressed interest. According to sources, the partners would then allegedly be required to open phoney bank accounts, establish shell companies, and promote the software or apps, among other tasks. The ED recently detained a middleman and a teacher from Delhi for allegedly duping a person into cooperating with the investigation.

What was Done in this Mobile Phone App Fraud?

With this app, which was run by Chinese nationals in collaboration with their partners in India, including Vaibhav Dipak Shah and Sagar Diamond Ltd., thousands of people have been defrauded, the ED claimed. "Many manufacturing units of the businesses at Surat SEZ were found to be engaged in an outrageous overvaluation of import-export of diamonds, gemstones, and other precious metals and syphoning of monies overseas in the disguise of fraudulent imports," the official added.

The official stated that thousands of crores of rupees worth of equities included in the books of accounts were discovered to be significantly overvalued and had an approximate value of Rs. 10 crores. "Insignificantly valuable synthetic rubies were displayed as precious gems," the ED reported.