Predatory lending by instant loan apps has led to a spate of suicides in several states. Many of these apps have been traced to China and Hong Kong, and money laundering channels that use cryptocurrencies have been unearthed. Despite the arrest of several players, including Chinese nationals and Indian accomplices, such apps continue to flood the market. They lure desperate individuals into the debt trap and abuse access to their smartphone data to extort exorbitant amounts.
In this series, News18 will shed light on the human cost of the fraud and investigate national security implications of the Chinese harvesting Indians’ data.
When the world was battling the Covid pandemic, some Chinese nationals were busy using this as an opportunity to make wrongful gains, News18 has learnt.
A major expansion of murky loan apps in India started after the first lockdown. The scammers were looking for Indians who were in dire need of money.
The whole architecture of these predatory apps is built in a way so that the Chinese nationals who started everything can escape easily without leaving any footprint, officials said.
In some cases, they added, the Chinese nationals didn’t even actually meet anyone in India and were in touch with them through apps.
In one case, Delhi police arrested almost 150 people, including fake directors of such an operation this year, and found that the Chinese people behind them stayed in contact through an app. The app has a server in Singapore and directors used to get instructions through that route.
In some cases, it has been found that the parent companies are registered in China: Guangzhou, Shenzhen, Beijing, etc.
Investigators in 90% of the cases failed to arrest Chinese nationals due to a complex system and no availability of information, said sources.
The first case that was investigated in India linked to these loan apps was probed by Telangana police, officials said. The then joint commissioner Avinash Mohanty told News18 that everything started while looking into a betting case.
“We got to know about these loan apps while probing betting apps. When we did a thorough investigation, we found that a loan app menace had been orchestrated by Chinese nationals. In a few cases, we found that the people who used to make threatening calls were taking instructions from their heads in Indonesia. The entire operation of these loan apps appears to be run with Chinese nationals at the helm. This was also indicated during an investigation into the multi-crore colour prediction gaming app scam where crores of rupees was transferred to shell companies that were registered as NBFCs,” he said.
Since everything is being operated from outside India, agencies rely on circular notices that have an impact only if the foreign nationals are in India. If they have already left, the officials need to approach Interpol.
“We issued a lookout notice for a Chinese man Liu Yi who floated various companies through fake directors in 2019. The apps he was running through the company had almost 1.5 lakh downloads. His parent company was Jianbing Technology in Hangzhou, China. He is the director of Omelette Technology Private Limited but indirectly controls or owns various other companies that run dozens of lending apps,” JN Pankaj, deputy inspector general (DIG) of police, economic offences wing (EOW) and special task force (STF), Odisha, told News18. The accused Chinese national is still on the run.
Another case that is being investigated by Delhi police revealed that money was routed to Dubai by converting it into cryptocurrency. These apps are linked to betting apps as well. The accused has so far told the police that he was initially a victim who took loans from these apps but a few people who were already working for the company told him to work with them. He also got some money back after he started working for these predatory apps.
The main challenge agencies are facing that will have implications on the Indian financial system is converting Indian money into cryptocurrency. The Chinese pumped in money directly but received money through cryptocurrency, which is almost impossible to intercept. The money, which could be in thousands of crores of rupees, is getting converted into cryptocurrency and no one knows who is withdrawing it, where, and in which currency. These cryptocurrency servers are not accessible and the companies that run them are also not keen to share any data, said sources.
Servers outside India
Investigators of different agencies have found that in all such cases, the servers of these apps are located outside India. The call centre staff who threaten and extort money get system access by logging in from the IDs given by their seniors.
“They don’t have access to the data of people who have taken the money. We arrested close to 150 people who were working in a call centre and found that they used to log in to get data. The contacts that were hacked by these apps and gallery photos from the victims’ phones were uploaded and saved in servers located outside India,” a Delhi police officer deputed in the Outer North district said. CNN News18. Since servers are located outside India, that too at an unknown location, agencies are helpless to take action.
Salary in cash
While these apps had everything online, their workers were getting their salaries in cash. In cases reported in Telangana, Odisha, Delhi, and Maharashtra, it has been found that the arrested accused who were getting merely 12-15 thousand rupees were getting paid in cash. In cases where cops arrested a few Chinese people, it was discovered that they used to provide money in cash to team leaders who would then distribute salaries to the rest. The Chinese nationals had no bank accounts as that would require various documents that they never provided. In fact, in most of the cases, the sleuths are not even aware of the actual names of the Chinese nationals who faked everything, as the bogus directors had hardly any details about them.
Network in over 6 countries
Investigations by police departments of several states like Delhi, Maharashtra, Telangana, Odisha, Gujarat, etc, found that these Chinese nationals have floated companies in various countries including Indonesia, Sri Lanka, Pakistan, Nepal, and Bangladesh.
The sleuths also found after arresting some Chinese nationals that they had plans to open networks in Africa and West Asian countries after extorting money from Asian countries.
“Evidence suggests that they are running similar scams in Indonesia, Sri Lanka, Pakistan, Nepal, and Bangladesh, and also have links in the USA and Hong Kong. They are in the process of expanding their financial criminal network in African and West Asian countries,” an intern report prepared by a specialised government agency says.
Similarly, other investigations by the ED, and income tax department also revealed that money was being circulated to different countries after getting it converted to cryptocurrency.
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