ED probe reveals use of crypto wallets by Chinese digital loan apps

MUMBAI: An Enforcement Directorate (ED) money-laundering investigation related to digital loan apps operated by Chinese nationals revealed that multi-crore proceeds of crime were allegedly siphoned off outside India using crypto wallets/accounts.
The funds utilised for the disbursement of short-term online loans were allegedly sourced from crypto wallets even as the subsequent loan collections were deposited in crypto wallets back again, ED sources said. They were later converted into crypto currencies and then withdrawn through wallets located overseas, while some of the wallets were allegedly accessed from Hong Kong, the agency’s probe found out.
The case involves digital loan apps that allegedly indulged in disbursing short-term instant loans through various mobile applications while charging exploitative rate of interest from the public, ED sources said.
ED began its investigation on the basis of several cases registered under various sections of the Indian Penal Code, Information Technology Act and Foreigners Act against entities/persons who indulged in digital-lending transactions, based on complaints filed by number of borrowers.
The agency arrested two Chinese nationals, Xiao and Wu, recently for their alleged involvement in the case. ED’s investigation revealed that a few Chinese nationals had incorporated two firms in 2020, which allegedly provided online short-term instant loans through mobile apps.
The borrowers had alleged that they had been threatened and abused to repay the loan and were charged exorbitant rates of interest and processing fees. The complainants had downloaded mobile applications on their phones and applied for small loans, ranging from ₹5,000 to ₹10,000, wherein, they had to share their personal information. In case of failure to repay the loans, the borrowers were pressurised to take fresh loans from other mobile apps to repay the previous one, which drew them into the loan trap, the sources said.
Once the tenure of the loan would get over and in the event of non-payment of loan before due date, their personal data was allegedly mis-used to harass and extort money from them. At the time of the loans’ disbursal, around 20 to 30% of the sanctioned amount was allegedly deducted upfront in the name of processing fees and other charges. The tenure was kept at 7 to 15 days, while the interest rate charged was on the higher side, the sources said.
The agency suspects that loans worth ₹49.2 crore had allegedly been collected/recovered by harassing the borrowers. Funds worth ₹19.43 crore have been frozen by the agency across several states as part of the probe.