Online Forex Trading App OctaFX Under ED Scanner For FEMA Violation

Continuing on its spree of crackdown, the enforcement directorate (ED) has now frozen assets INR 21.14 Cr belonging to online forex trading app OctaFX. 

This comes after agency sleuths raided multiple premises belonging to the Indian arm of the company over concerns related to alleged violation of Foreign Exchange Management Act (FEMA) norms.

“ED has freezed account balance to the tune of INR 21.14 Cr of M/s OctaFX and related entities in various bank accounts. Earlier, ED had conducted searches at various premises of M/s OctaFX India Private Ltd. and related concerns under the provisions of FEMA in the case of Illegal online forex trading through international brokers namely OctaFX trading app and website”, said the agency in a statement.

Further probe into the matter is currently underway.

The investigation into the firm revealed that funds collected from various users were channelised through various dummy entities. Subsequently, the amount was then purportedly layered through multiple domestic accounts to finally undertake cross-border transactions.

“The said app (OctaFX) and its website have not been authorised by the RBI (Reserve Bank of India) to deal in forex trading. The conduct and operations of forex trading (not being conducted on recognized stock exchange) is illegal, and also violates FEMA Regulations”, added ED.

This comes days after RBI issued a public advisory warning the public against undertaking forex transactions on unauthorised electronic trading platforms (ETPs). It also issued an ‘Alert List’ that included entities not authorised to deal in forex transactions. 

OctaFX stands glaringly in the middle of that RBI-issued ‘Alert List.’

OctaFX Under Lens

Describing the modus operandi, ED said that funds collected in the guise of forex trading were routed through multiple e-wallets or bank accounts of dummy entities. 

“The said accumulated funds, after defrauding these investors/users, were simultaneously transferred to multiple e-wallet accounts such as Neteller, Skrill or to bank accounts of dummy entities,” noted the ED.

Further investigation into the matter revealed that a major portion of the ‘defrauded amount’ was then routed towards purchasing cryptocurrencies and assets through Zanmai Labs.

It is pertinent to note that Zanmai Labs is the parent company of cryptocurrency exchange WazirX.

ED also added that Zanmai Labs provided banking channels to move the deposits from INR to WazirX wallets. The funds were eventually transferred to entities overseas in the form of cryptocurrencies through the Binance crypto exchange.

The new developments have raised questions over the link between Zanmai Labs and Binance. As agency sleuths swooped down on the offices of WazirX early last month, a public fracas erupted between WazirX and Binance as the latter’s CEO Changpeng Zhao said that his exchange never acquired WazirX despite a public announcement back in 2019. Zhao later claimed that the deal never closed.

While ED had initially frozen assets worth INR 64.67 Cr belonging to WazirX post the raids, it unfroze the accounts earlier this month.

Another Day, Another Crackdown

This adds to the ongoing saga of ED crackdown on multiple fintech entities as well as illegal Chinese loan apps. 

Earlier on Thursday, the enforcement directorate said it carried out a search operation in connection with a probe into app-based token HPZ and other similar apps. An amount of INR 9.8 Cr was frozen as part of the overarching probe into multiple illegal loan apps and the HPZ token scam.

This comes days after three premises linked to gaming top-up platform Coda Payments India were raided in connection with a money laundering probe. On Wednesday, officials also froze Bitcoins worth INR 12.83 Cr in a separate money laundering probe involving a gaming app called E-nuggets.

Prior to that, offices of many fintech giants, including Cashfree, Paytm, Razorpay and many others, were raided in an investigation involving illegal Chinese loan sharks and the HPZ token case.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.