Fake profits to human trafficking: The Whatsapp stock market scam decoded

She said she initially got some returns from her investments and as she began to trust system, she decided to invest Rs 1 crore, according to the the officer. But when Trishala wanted to withdraw her money, the accused allegedly refused to let her do so and removed her from the group.

In a similar case, Sector 16-resident Rohit Chawla filed a report in the cybercrime police station on Sunday night, alleging he was defrauded of Rs 40.70 lakh.

Earlier this month, the Enforcement Directorate (ED) initiated a money-laundering investigation into an alleged multi-crore fraudulent online scam in which a large number of gullible investors across India were cheated of their hard-earned money by inducing them to invest in stock markets through fake mobile apps. The agency’s inter-state probe revealed that the accused employed a maze of 200-plus shell firms to acquire and then divert the proceeds of crime (PoC). Some of the shell firms are located abroad. The ED has arrested four Bengaluru residents who have been accused of siphoning about Rs 25 crore from people after they were lured to invest in the stock market through fake and fraudulent apps.

Modus Operandi of Investment Cyberfraud

The investigation conducted under the PMLA, 2002 has revealed that victims of the aforementioned cyber scams are being cheated through fraudulent stock market investment options in following manner: –

a) Luring Victims: The first step of scam involves luring the victims via various social media platforms including Facebook, Instagram, WhatsApp, and Telegram by giving false promises of high return on their investment, allotment of IPOs through special quota, etc.

b) Fake Groups: Once the victims seem interested, these scamsters then add these victims to WhatsApp/Telegram Groups, which also have fake members planted by these scamsters in these groups for sharing fake and fabricated success stories in these WhatsApp group. These WhatsApp groups have names similar to well-known apps/financial institutions e.g. ICICI Securities, GFSL Securities, SMG Global Securities, Blackrock Capital, JP Morgan to create an impression that these groups are genuine.

c) Fake Apps: Once the victims are convinced about the genuineness of the WhatsApp/Telegram Groups and the fake success stories planted by members, scamsters then ask these victims to install fraudulent apps for the purpose of investments. For the purpose of installing the Apps, Scamsters share the links or apk file over WhatsApp to the victim. The names of various stocks, futures, option, forex etc. shown on these apps are the same as that of well-known companies (e.g. Reliance, Tata power) to create an impression that the Apps are genuine. Screen shot of one of such fake app is as under:-

d) Fake Investments: Thereafter these scamsters induce the victims to invest in various fake IPO stocks, fake Stocks, etc. and make them transfer their hard-earned money to the bank accounts of shell companies created for the specific purpose of collection of cybercrime proceeds. Thus, these victims are duped of their hard-earned money. A screenshot of the fake app showing fake IPO stock (having same name as the real IPO) wherein the victim had invested is as under: –

e) Siphoning the Funds: To build further trust, the victim might initially get good returns on their investment as shown in the dashboard of App, which gives them confidence and encourages them to invest more amounts. These returns are entirely fictitious and do not exist in reality. They are just numbers shown on these fake apps. As the victim invests more funds, they eventually realize that they are unable to withdraw their funds. When the victims try to withdraw their money from these apps, the scammer asks the victims to pay statutory taxes, brokerage fees, etc. which are nothing but ways to extract even more money from the victims. Once the scammer believes that they have extracted as

much money as possible, they cut off all communication and disappear, leaving the victim helpless and with no recourse. A screenshot of the app showing the message ‘Please contact customer care to complete the repayment first’ when the victim tried to withdraw his money is as under:-

Cyberscam: Behind the scenes

a) Arrangement of SIM Cards

Scammers contact various individuals within India via Telegram groups to acquire hundreds of SIM cards illegally. There are various Telegram groups where black marketers provide SIM cards.

b) Creation of Shell Companies:

Scammers incorporate hundreds of shell companies specifically for acquiring and siphoning off Proceeds of Crime generated from these Cyberscams. They use the addresses of coworking spaces to provide a physical/virtual address for the incorporation of these shell companies. Further, it is revealed that during the filing of Form INC-20A (required to be filed on MCA portal for commencement of business by company), scammers have submitted forged bank statements as proof of share subscription by shareholders. Investigation by ED has further revealed that the scammers operate through a network of mule bank accounts which are rented through channels such as Telegram. Investigation has revealed that the Proceeds of crime is finally converted into crypto currency and siphoned off abroad to avoid detection and recovery.

c) Money Movement through Shell Companies: Funds are moved from the victim’s account through several intermediary accounts including Mule Accounts (taken on rent by scamsters) for layering the PoC. This involves numerous transactions between accounts to create a convoluted web that conceals the original source of the funds. Small transaction amounts (less than Rs 5 lakh) are used to avoid triggering alerts for suspicious activity. The illicit funds are routed through these shell companies.

d) Cryptocurrency: A key finding of the ED investigation is that the proceeds of these fraudulent activities were mostly converted into cryptocurrency. This conversion was a deliberate strategy employed by the accused to further obscure the origins of the illicit funds and to facilitate their transfer out of India. By converting the proceeds into cryptocurrency and transferring them abroad, the perpetrators aimed to avoid detection, tracing, and recovery by law enforcement agencies.

e) Human Trafficking and the use of Foreign Jurisdiction: 

The Golden Triangle, located at the intersection of Thailand, Laos, and Myanmar, has long been known for illicit activities, including drug trafficking and human trafficking. Indian citizens are lured on the pretext of job offers and trafficked to this Golden Triangle and are being exploited in cyber fraud operations including this Cyber Investment Scam. Criminal networks force victims to work in call centers or engage in online scams, under harsh and coercive conditions.

First Published: Sep 09 2024 | 1:13 PM IST