The Enforcement Directorate (ED) is investigating suspected illegal remittances of foreign exchange totalling ₹50,000 crore as part of its scrutiny of transactions by fintech firms, people familiar with the matter told ET.
These entities reported fake transactions like import of services including software, exports from special economic zone units, providing cloud computing services and leasing GPU server space to send or receive money, they added.
Alleged involvement of bank officials in “leaking out” information of the ED probe to the accused is also under the scanner, the people said.
The agency last week carried out searches on residences of one of the suspects, Manideep Mago, and his company, Birfa IT Services. He, the people said, was involved in illegal sale of cryptocurrencies and remittance of more than ₹3,000 crore to Canada and Hong Kong.
Based on its findings, the Delhi Crime Branch filed an FIR and arrested Mago and an accomplice named Sanjay Sethi. The ED will now investigate the company and the duo under the Prevention of Money Laundering Act, the people said.
While acting on a tipoff, the ED discovered suspicious crypto transactions worth ₹1,850 crore by Delhi-based Birfa IT Services, the people said.
The agency launched an inquiry under the Foreign Exchange Management Act (FEMA) and found out that the company had sold crypto assets worth ₹1,850 crore and encashed the amount. Additionally, it deposited ₹1,300 crore in cash and utilised this to make allegedly bogus outward remittances to Hong Kong and Canada, they added.
“Mago is an IT expert and a cryptocurrency nerd. He used complex jargon and hoodwinked IT authorities by using complex terms to justify heavy outward foreign remittances to his own firms in HK and Canada,” a senior official said on the condition of anonymity.
Mago had set up companies abroad with the “stated objectives” of providing IT components, assembling of servers, escrow service etc., the official said.
During questioning by the ED, Mago claimed that he received ₹50,000 in cash and crypto from around 70,000 customers who approached him for purchase/lease space on his foreign servers to mine crypto currency.
But he could not provide details of any of these customers, said another senior official. He also could not explain the source of cryptos worth ₹1,850 crore which he had “mysteriously” obtained and received in his Binance account, said the people ET spoke with.
The ED is also investigating the role of several bank officials who allegedly facilitated Mago in deposits of huge cash, which he declared in his income-tax returns “after showing bogus expenditure and made foreign remittances”.
According to ED’s FEMA probe, these funds were later diverted to beneficiary parties which are being identified by the agency. Mago, in cahoots with his employees, allegedly collected cash from hawala operators in Delhi and systematically sent it abroad, according to ED officials.
During his questioning, Mago admitted that the invoices for leasing of GPU server space and educational software raised by his Hong Kong and Canadian companies were bogus and that no service or product was provided by these entities.
The ED claims that the entire set up was created as a “facade” for remitting cash received from Sethi.
During the raids on May 28 on the residences linked to Mago and his company, the ED seized five high-end luxury cars worth more than ₹5 crore, three cold crypto wallets and ₹5.46 crore lying in the bank accounts, officials said.
