ED Targets Crypto Networks in Major Crackdown on Illegal Cross-Border Transactions

New Delhi, October 29 (Daily Kiran) : The Enforcement Directorate (ED) has intensified its efforts against illegal cross-border money transfers involving cryptocurrencies, particularly stablecoins. This crackdown, which took place on October 29, targeted several locations in Bengaluru and Madhya Pradesh. Authorities uncovered significant violations of the Foreign Exchange Management Act (FEMA), 1999, along with evidence of unauthorized foreign financial transactions amounting to thousands of crores.

The investigation began following complaints against RPFAAS Technologies Pvt Ltd, a Bengaluru-based company allegedly operating two platforms facilitating international money transfers using cryptocurrencies. The ED claims these platforms bypass authorized banking channels, promoting crypto-based rapid international payment services without the Reserve Bank of India’s (RBI) approval.

Initial findings indicate users register on the first platform, depositing funds into the company’s bank account. These funds are converted into stablecoins like USDT. The crypto assets are then sold on Indian exchanges, and the proceeds are sent to beneficiaries without using authorized remittance channels.

The ED asserts that the company offers “on-ramp” and “off-ramp” services, simplifying the conversion of fiat currency to crypto and back to cash, thus easing cross-border money transfers.

During the searches, the agency discovered evidence of several shell companies established in countries such as Canada, Lithuania, and the United States. According to the ED, a substantial amount of crypto assets was held on foreign trading platforms.

The initial investigation revealed potential violations under FEMA exceeding ₹4,600 crores, including crypto assets held on foreign platforms and unauthorized cross-border transactions. The ED also conducted searches related to the decentralized finance platform Instadapp, now operating under the name Fluid.

Instadapp is a blockchain-based platform where users can lend crypto tokens, borrow against them, and trade various crypto assets. Open-source data indicates that over $1 billion worth of crypto assets is locked on this platform, generating fees of approximately $149 million.

The ED claims that while Instadapp presents itself as a U.S. company, its operations and development are managed from India. The investigation revealed that founder Soumay Jain and his team were overseeing the platform from India, while multiple companies were established in the U.S., British Virgin Islands, Singapore, and Dubai. These entities have been described as “paper” or “shell” companies, lacking sufficient staff and operational infrastructure.

According to the ED, the platform’s income and funds from investors were initially deposited as stablecoins in multi-signature wallets of companies based in the BVI. These were later sold on trading platforms in Singapore, with cash being transferred to affiliated companies’ accounts. From there, the funds were sent to India under the guise of software development and consultancy fees.

The investigation also revealed that prepaid bank cards from Singapore were being used for expenses in India. Some funds were also transferred to bank accounts in Dubai. The ED has raised concerns about potential FEMA violations amounting to approximately $40 million (over ₹330 crores). The agency stated that further investigations are ongoing, with more revelations expected in the coming days.