The Enforcement Directorate’s Bengaluru Zonal Office conducted searches at six locations in Bengaluru related to suspected violations of the Foreign Exchange Management Act (FEMA) through unauthorized cross-border money transfers using cryptocurrencies. The searches, carried out under Section 37 of FEMA, targeted firms accused of using virtual digital assets (VDAs) for international money transfers. Complaints alleging large-scale FEMA violations by Bengaluru-based entities using cryptocurrencies prompted the investigation.
Intelligence gathered during discreet inquiries suggested that unlicensed payment system operators were using VDAs to bypass FEMA regulations for cross-border remittances. These entities were found to openly promote services on websites, offering quick conversion of fiat currencies into cryptocurrencies for global money transfers. They facilitated the conversion of traditional currencies like the Indian rupee, US dollar, and euro into cryptocurrencies like Bitcoin and stablecoins such as USDT.
The investigation revealed a common practice where customers would register on platforms to transfer funds abroad or into India. Funds deposited into the companies’ bank accounts were used to purchase virtual digital assets, particularly stablecoins like USDT. These assets were then sold through crypto exchanges in India, with the proceeds transferred to the intended recipients, sometimes allowing recipients to claim tax benefits.
None of the entities under investigation were authorized by the Reserve Bank of India (RBI) for cross-border money transfers, operating outside the regulatory framework for inward and outward remittances. Investigators found that several firms were routing transactions through foreign entities while being controlled from India. For instance, Mokshagna Technologies Private Limited was accused of large-scale fund transfers into India using virtual digital assets without authorization.
Transak Technology India Private Limited allegedly offered off-ramp services without RBI authorization, converting money deposited in India into virtual digital assets and withdrawing the proceeds abroad. Carretx Technologies Private Limited, operating the “Carret” mobile app, was accused of enabling retail users to trade cryptocurrencies and facilitating unauthorized fund transfers into India through OTC transactions with foreign-based remittance applications.
Search operations revealed the use of large-volume OTC crypto transactions, shell companies in tax havens, and foreign-based cryptocurrency trading platforms for unauthorized cross-border fund transfers. Preliminary findings suggest FEMA violations involving unauthorized international money transfers exceeding Rs 2,500 crore. Restraint orders were imposed on certain bank accounts suspected of being used for unauthorized transactions, with balances around Rs 6 crore.
