India's Enforcement Directorate (ED) has frozen nearly Rs 32 lakh ($3.83 million) worth of cash deposits and other assets linked to the Highrich online group.
The group is under investigation for allegedly running a cryptocurrency Ponzi scheme.
for every HindusCiting sources close to the matter, the ED investigation revealed that KD Prathapan and Sreena Prathapan's Highrich group collected nearly Rs 1,500 crore (US$179,532.75) from investors under the guise of high returns and an annual interest rate of 15%.
The ED accused the company's promoters and stakeholders of engaging in illegal cryptocurrency trading activities on several exchanges and promoting their own cryptocurrency, HR Crypto Coin.
The executives claim that these crypto assets were used in a Ponzi scheme, where investors were lured with promises of high returns funded by contributions from new investors. According to the agency, investors were also promised a 30% direct referral income for bringing new clients into the scheme.
Since January, the ED has reportedly frozen Rs 260 crore ($31.12 million), including Rs 212 crore ($25.4 million), from 55 frozen bank accounts of the company and their owners. The investigation also traced ₹15 crore ($1.8 million) in immovable properties linked to the promoters and other leaders, which were allegedly obtained from the proceeds of crime.
As a result of multiple complaints filed by the Kerala Police, the police department raided the premises of HighRich Smartech Pvt. Ltd, HighRich Online Shop Pvt. Ltd. and related entities, resulting in the total assets frozen or seized reaching Rs. 260 Crores (US$ 31,119,010.00).
Combating crypto-Ponzi schemes
Ponzi schemes are often disguised as real investment solutions. However, returns to existing investors are funded by contributions from new investors rather than actual profits.
These schemes continue to pose a serious threat to global financial markets and investors. Recent high-profile cases underscore the urgent need to implement strong regulatory measures to prevent and mitigate the impact of such fraudulent practices.
In June 2022, Celsius Network, a cryptocurrency lending platform, halted all transfers indefinitely and subsequently filed for Chapter 11 bankruptcy. The company had lent $8 billion to its clients and managed nearly $12 billion in assets. An internal memo described their business model as resembling a Ponzi scheme.
In another notable incident, FTX, formerly the world's second-largest cryptocurrency exchange, filed for Chapter 11 bankruptcy in November 2022. It was revealed that clients' assets had been used for risky investments, resulting in a large financial deficit.
The US Securities and Exchange Commission (SEC) actively combats Ponzi schemes, which pose significant risks to investors and the financial system.
US Senator Elizabeth Warren has expressed major concerns about the cryptocurrency market's lack of regulatory oversight. It has recently called for stronger SEC oversight to protect investors and ensure financial stability. However, Warren's statements sparked a contentious debate within the cryptocurrency industry, with some leaders expressing concerns about the potential implications of a more aggressive SEC presence.
SEC Chairman Gary Gensler has shown an increasing inclination towards regulating the cryptocurrency market, calling for its integration into the financial regulatory framework.
In the same vein, Deputy Treasury Secretary Wally Adeyemo and others expressed concerns about the need for strong regulations to limit the misuse of cryptocurrencies for illicit purposes such as sanctions evasion and terrorist financing.
