Recent reports have highlighted an ongoing investigation by the Enforcement Directorate (ED) involving eight prominent payment gateways, including Razorpay, PayU, Easebuzz, and Paytm. Over the past two years, the ED has frozen approximately Rs 500 crore in virtual accounts linked to these entities. This action is part of a probe into one of India’s largest cryptocurrency scams, centered around the HPZ Token scheme allegedly operated by 10 Chinese nationals.
According to the reports, the scam amassed over Rs 2,200 crore from unsuspecting individuals across 20 states. These funds, classified as “proceeds of crime,” were transferred overseas, but Rs 500 crore was intercepted and frozen by the ED during bulk transactions via payment gateways. The investigation aims to trace the money trail and determine if the payment gateways generated mandatory Suspicious Transaction Reports (STRs) for the Reserve Bank of India (RBI) and the Financial Intelligence Unit (FIU). STRs play a critical role in ensuring further scrutiny by enforcement agencies.
Razorpay Refutes Reports of Scrutiny
Amid these developments, Razorpay has issued a statement categorically denying the claims that it is under ED scrutiny. The company called the reports “factually inaccurate and misleading.” In its official statement, Razorpay said:
‘The recent news reports suggesting Razorpay is under scrutiny by the Enforcement Directorate (ED) are factually inaccurate and misleading. We have not received any new notices, communications, or inquiries from the ED related to the issues referenced in these articles. Furthermore, we were not approached by the media for comment before the publication of these reports.”
The company also emphasized its commitment to ethical practices and compliance, adding: “As a responsible and compliant corporate entity, we want to reiterate the fact that Razorpay has and will continue to hold ourselves to the highest level of governance and conduct.”
Details of Frozen Funds
Of the Rs 497 crore frozen by the ED, PayU accounts held the largest amount at Rs 130 crore, followed by Easebuzz with Rs 33.4 crore, Razorpay with Rs 18 crore, CashFree with Rs 10.6 crore, and Paytm with Rs 2.8 crore. Additional funds were frozen in accounts tied to smaller gateways, including WunderBaked, AgreePay, and SpeedPay.
The HPZ Token Scam: A Nationwide Operation
The HPZ Token scheme lured investors through a mobile app, promising cryptocurrency mining opportunities, including Bitcoin. Investigations have revealed that the accused operated a vast network, registering over 100 shell companies in at least 20 states. Delhi alone accounted for over 50 firms linked to 84 bank accounts.
A PMLA court in Nagaland recently declared Bhupesh Arora, a Delhi resident and key suspect, a fugitive economic offender. Arora fled to Dubai in 2022 despite a non-bailable warrant against him. The ED has since filed a chargesheet implicating 298 individuals involved in the scam.
Ongoing Investigations and Industry Implications
The ED’s investigation into the HPZ Token scam underscores the vulnerabilities within India’s digital payment ecosystem. Authorities are scrutinizing the role of payment gateways in facilitating the flow of illicit funds and ensuring compliance with anti-money laundering regulations. While Razorpay has refuted the claims of being under scrutiny, the broader investigation highlights the need for robust governance in the financial technology sector.
ALSO READ: India Inc’s Investments Soar 39% To Rs 32 Trillion In Nine Months: SBI Report