The Enforcement Directorate (ED) on Tuesday said it has unearthed an alleged money laundering network worth Rs 40 crore that duped a number of investors by launching an initial public offer (IPO) in 2022 and share manipulation.
The federal probe agency conducted searches on October 29 in Mumbai and seized 400 cheque books linked to ‘mule’ bank accounts and 200 mobile phone SIM cards to probe “large-scale” manipulation of financial records using techniques like ‘pump and dump’ and ‘drawer
companies’. The investigation, being conducted under the provisions of the Prevention of Money Laundering Act (PMLA), is against a company named Varanium Cloud Ltd., its promoter Harshavardhan Sabale and other associated entities, the ED said in a statement.
The company and its linked firms “raised about Rs 40 crore through their September 2022 IPO, claiming it would be used to set up edge data centers and digital learning centers in smaller towns”. It projected itself as a fast-growing technology firm in the fields of digital media, blockchain, and EdTech, and even invoked the names of prominent business groups and media outlets to promote the IPO, thereby gaining public trust, the agency alleged. However, it claimed, the promised projects were “never” executed, and the funds were “diverted” through false transactions and circular movements to “inflate” turnover and market value. The agency found that subsequent trading patterns showed “artificial” price escalation followed by heavy offloading of shares, consistent with a “pump and dump” scheme, where the stocks of the company are deliberately inflated through misleading claims and later dumped at high prices, duping the public and causing losses to genuine investors.
Preliminary probe of the seized material shows that a “vast” network of mule bank accounts, opened using forged KYC documents and dummy SIM cards, was being operated from Mumbai. Over 400 cheque books linked to such mule bank accounts and more than 200 SIM cards, contained in more than 100 dual SIM mobile phones, mostly issued in the names of persons from Mumbai, were recovered during the search, the ED said. These accounts were used for “layering” and “routing” funds through over 150 shell and dummy companies, concealing the origin of “illicit” money, it said.
“The findings expose a well-coordinated racket operating ‘drawer companies’ from a few small rooms, wherein fake identities, multiple mule bank accounts, and proxy communication channels were systematically used to dupe the public and launder their hard-earned money,” the ED said.
