India's Enforcement Directorate Goes after Crypto Scam, seizes $5.85 Million
India's Enforcement Directorate Goes after Crypto Scam, seizes $5.85 Million
The app promised high returns on deposits, and is estimated to have scammed people around 350 Crore to 500 Crore INR ($44M to $63M).
I hate doing this to you on a Monday, but I have no choice. I need you to read this story. There is more to it than just the headlines. And it is possibly one of the largest scams in India allegedly looting over 350 Crore INR in a span of just one month.
HPZ Token was a crypto application in operation since June 2021. The scam was simple - Give us money, and we will give you back more.
By August 2021, people stopped receiving the promised interest, and also stopped receiving withdrawals of their funds. In fact, the company blatantly asked people to deposit 5000 INR in order to become “verified members”. Those who invested money were scared, confused and running from post to pillar to figure out if they would ever see their investment back.
On August 17/18 the company’s website became un-operational, and the verdict in 100s of online videos was clear, “HPZ is a scam”.
In October 2021, a Cyber Crime complaint was filed from Kohima, Nagaland. This complaint would go on to become the catalyst for an investigation that led to a seizure of 46.67 crore INR by the Enforcement Directorate of India last week.
This scam may have cost investors somewhere around 350 Crore INR to 500 Crore INR ($44M to $63M). The size of it was discovered when the Gujarat Registrar of Companies filed a complaint alleging the money laundering. Soon, it was understood that Chinese loan companies and some of the same bad actors were behind this scam.
I have been working non-stop for 7 hours peeling off the onion layers one by one learning about how ruthlessly they pulled off a scam and the supposed influencers who are expected to help people used click baits to gain more viewers over directly informing people it’s a blatant scam.
A third-party site with bad pagination and masquerading as a place to log Cyber Crime complaints ironically residing at the address cybercrimecomplaints.in shows, that there may have been 1000s of victims of this app. And this is not the only site where people raised the concern.
I have sifted through 25 websites, and read over 20 reviews, all freaking click baits like HPZtoken, real of scam? Read to find out. And my faith in humanity died a little, with every article I read as some of them continued to tell people that the site looks risky, but they can take a risk if they want to.
Not only that, but a ton of youtube videos show how so many people identified the scam, a little too late. The videos gained views but the commenters lost their money.
But it wasn’t all Godly and educational there. A Youtuber made four long videos on HPZ token, calling it a scam in all of them, then saying you may try it out, and had his referral link in the description. (not sharing links for the privacy of the YouTuber). In one short video, he literally says, “I have made two videos on HPZ token and you still keep asking me if it is real or fake, this is my earning (shows screen)”.
HPZ token actually made themselves look like they were Balaji Srinivasan’s 21 inc., and that HPZ token was his project. They even updated Balaji’s Wikipedia page mentioning HPZ as his company.
Here’s a tweet by Sunny Nehra, a cyber security expert exposing this. For the uninitiated Balaji is a huge crypto evangelist having worked with Coinbase and has created several companies like Earn.com and 21.co (21 Inc).
How did HPZ Token operate?
For each scam, there has to be a way for people to deposit money. Let us dig into how HPZ Token operated. My sources are youtube videos with thousands of views, giving exact directions and ending their videos with “this may be a scam, but you may try with a small amount”.
Signup with your phone number.
Recharge the account with the amount of money you wish to invest. Users can pay by UPI or various payment gateways (Remember this).
Choose the machine you want to invest in (Dallas Mine, Siberian Mine or Cloud Computing). If you didn’t know by now, let me remind you that these are fake.
Each machine comes with a specific amount requirement and locking days. Whatever you choose, your funds will be locked accordingly. Roughly 60 days.
You’re supposed to receive huge interest on this, and the interest starts showing up on the dashboard, making the investor rich on paper.
Then users were allowed to withdraw the interest earned, but the principle was locked for 60 days.
Within a matter of weeks, the withdrawals of interest stopped.
HPZ pulled off a second scam when they told users to buy verification with 5000 INR for a quick withdrawal. And people invested (Sigh).
Before its final shutdown, HPZ managed to pull off one more scam by asking people to pay 2500 if they can’t pay 5000 and become “Junior members”.
And then sometime between August 17-19, the site was gone.
I know what you are thinking. I know. Because I am thinking the same thing. How the heck do people fall for this? But they did. And most of them invested when someone else suggested them to.
Every time I go on stage at an event where people are talking about education, I say, “Education does not matter, because people invest when they see their friends and family making money". One day I may prove this with statistics, but until that time, I will hold this belief dearly. I bought bitcoin when someone told me their 1 lakh investment became 3 lakhs. It was never about the tech in the beginning. It never is.
The investigation by Enforcement Directorate
Of course, the seeds of the scam were sown much earlier but it began to come to light when investors tagged Balaji Srinivasan on Twitter asking if HPZ was indeed his company, to which he replied no. This happened in August 2021.
When the company shut down, many people filed complaints with the Cyber Crime Department. It is unknown how many complaints were actually filed. But according to ED’s Press release, they acted on the one filed in Kohima Nagaland on October 8, 2021.
Many things came to light in the last year. In January 2022, it was discovered by Gujarat ROC that a lot of companies were operating loan apps and were Chinese in origin. They suspected a money laundering operation of 350 crore INR ($44 million). An independent TOI report says there were around 36 shell companies operating a nexus of scams.
On September 14, 2022, the enforcement directorate raided several premises in multiple cities in connection with the HPZ token app. And it came to light how many companies were operating under the guise of gaming and loans. A lot of the funds collected from users were transferred to these private companies and individuals.
Investigation revealed that the HPZ token was operated by M/s Lillion Technocab Private Ltd and M/s Shigoo Technology Private Limited. M/s Shigoo Technology Private Limited was also found linked to various Chinese controlled companies.
It was also revealed that various other companies were indulged in receiving funds from public on pretext of operating various Apps/Websites for gaming/loan/others. ED suspected involvement of M/s Jilian Consultants India Pvt Ltd, Gurugram behind various companies involved in these frauds.
One such entity, M/s Mad-Elephant Network Technology Private Limited in agreement with X10 Financial Services Limited was operating various loan Apps (YoYo cash, Tufan Rupees, Coco cash etc.). Similarly, Su Hui Technology Private Limited, in agreement with M/s Nimisha Finance India Private Limited had operated Loan Apps. During the search, various incriminating documents have been recovered and seized.
Funds held in banks and various payment gateway services were frozen. “A total amount of around Rs. 46.67 Crore ($5.85 million) was detected and freezed (frozen) in various bank accounts and virtual accounts,” says ED.
Recently ED has frozen funds for WazirX Exchange (Now unfrozen), Vauld, and multiple Payment gateways in their ongoing investigation of the Chinese Loan App scam.
This is the first instance of the enforcement agency’s seizure of a crypto project, or a derivative of it anyway. Many more may be under their radar.
Brutal Scams are Ruining Lives
The story is just that. A scam company looted money from unsuspecting investors and then eventually an investigation led to the seizure of whatever was left of this money.
There was no point in going deeper than that.
For over a month and a half, I have been writing this newsletter, and I have tried to remain neutral, factual, and for the most part, left my emotions aside. I tried to do that today, until this very point.
Because Newsletters are stories that the author tells, from their own perspective. And my perspective today, as I write this, mulling over it through the weekend, spending hours on research, is that THIS SH*T SUCKS.
Every day, hard-working individuals are being lured into the fairy tale that if you invest early, you will get rich. And every day, people fall prey to this, because they wish, just wish to have a better life for themselves. No amount of regulatory intervention will stop this. Nothing will protect many of these gullible investors.
And this makes me sad. Really sad.
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