India's CBI makes arrests, dismantles large-scale fraud HPZ token scheme

The Central Bureau of Investigation (CBI) in India has carried out several searches linked to the HPZ token scam, a development that has exposed large-scale fraud activity. According to the agency, the searches were carried out as part of its ongoing Operation Chakra-V against cybercrime.

According to the CBI, the searches bore fruit, revealing that they exposed a sophisticated and large-scale transnational cyber fraud running into hundreds of crores of rupees.

The agency conducted several raids in a coordinated operation in seven locations across several cities, including Hyderabad, Bengaluru, and Delhi NCR. The CBI claimed that it recovered several pieces of evidence from the locations, noting that the evidence was mostly incriminating digital and financial records.

CBI blows open large-scale fraud linked to HPZ scam

The CBI mentioned that the case, which has been registered under criminal conspiracy and fraud offenses under the Information Technology Act, points to an elaborate criminal conspiracy carried out in the country by Indian nationals, who were acting in collusion and under orders from their foreign-based masterminds.

Between 2021 and 2023, the group carried out organized crime under the guise of loans, job investment, and crypto schemes.

These criminal activities were carried out through the creation of several shell companies, which were used to open mule bank accounts. Mule bank accounts, in this case, are accounts that just exist for the sole purpose of moving illegal funds. The criminals usually operate many mule accounts, using unsuspecting victims in some cases, which makes it easy for them to layer their transactions, burying investigators willing to trace their transaction footprints in digital paperwork.

According to the CBI, most of the criminal proceeds from victims were routed through these accounts before they were converted into different digital assets and moved out of the country. Criminals prefer to use this route to move illegal funds because it is easier and largely untraceable.

In some other cases, when these kinds of funds are sent overseas, authorities in India no longer have jurisdiction over them. Thus, the police will need to liaise with law enforcement in the countries where the criminals are located.

Further investigations ongoing to find perpetrators

The CBI claimed that in their investigations, they discovered that most of the shell companies were set up at the behest of foreign masterminds. The entities were also incorporated in India, with most of them onboarded on several fintech and payment aggregator platforms to collect and channel public funds. The funds were consolidated, converted to digital assets, and then moved into different wallets before being moved abroad.

The CBI claimed that it was able to apprehend five accused for their active roles in executing the fraud. They are being presented before the competent court as per the due process of law. Further investigations are also still ongoing to trace the cross-border financial footprints, identify other individuals and entities involved in the crime, and unravel the full extent of the conspiracy.

CBI claims it remains committed to combating cyber-related financial crimes through intelligence-led operations, inter-agency coordination, and the use of advanced digital forensics to counter complex transnational fraud networks. This is one of the many crypto-related criminal activities that were unraveled by authorities this week. According to a previous Cryptopolitan report, Indian authorities claimed they discovered an illegal platform that has processed about $96 million in illegal funds.

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