The Enforcement Directorate (ED) in India recently took action against the Highrich online group by freezing around ?32 crore ($3.83 million) in cash deposits and other assets. This move comes as part of an investigation into the group’s alleged involvement in a crypto Ponzi scheme.
According to The Hindu, the ED’s probe revealed that K.D. Prathapan and Sreena Prathapan, the promoters of Highrich Group, collected approximately ?1,500 crore ($179,532.75) from investors by promising high returns and a 15% annual interest rate. The ED has accused the company’s promoters and stakeholders of engaging in illegal cryptocurrency trading activities on various exchanges and promoting their own cryptocurrency, HR Crypto Coin.
The agency alleges that the crypto assets were used in a Ponzi scheme where investors were promised high returns funded by new investor contributions. Additionally, investors were lured in with the promise of a 30% direct referral income for bringing in new customers.
Since January, the ED has frozen ?260 crore ($31.12 million) in total, including ?212 crore ($25.4 million) from 55 frozen bank accounts belonging to the company and its owners. The investigation also identified ?15 crore ($1.8 million) in immovable properties linked to the promoters and other leaders, allegedly purchased with proceeds from criminal activities.
The crackdown on Highrich Group was initiated following multiple complaints from Kerala Police, leading to raids on the premises of HighRich Smartech Pvt. Ltd., HighRich Online Shoppe Pvt. Ltd., and related entities. This resulted in the total frozen or seized assets amounting to ?260 crore ($31,119,010.00).
Ponzi schemes, like the one allegedly operated by Highrich Group, pose a significant threat to investors and financial markets worldwide. Recent incidents involving prominent cryptocurrency platforms, such as Celsius Network and FTX, highlight the importance of implementing strong regulatory measures to prevent and address fraudulent practices.
In June 2022, Celsius Network ceased all transfers and filed for Chapter 11 bankruptcy after admitting to operating a business model resembling a Ponzi scheme. Similarly, FTX, once the world’s second-largest cryptocurrency exchange, filed for bankruptcy in November 2022 due to risky investments using customer assets.
To combat such schemes, regulatory bodies like the U.S. Securities and Exchange Commission (SEC) are actively working to protect investors and the financial system. Senator Elizabeth Warren has raised concerns about the lack of regulatory oversight in the cryptocurrency market, calling for stronger SEC supervision. However, this has sparked debate within the industry about the potential implications of increased regulatory scrutiny.
SEC Chair Gary Gensler and Treasury Deputy Secretary Wally Adeyemo have advocated for robust regulations to prevent the misuse of cryptocurrencies for illicit activities such as sanctions evasion and terrorist financing. As regulatory authorities continue to address the challenges posed by crypto Ponzi schemes, investors are urged to exercise caution and conduct thorough due diligence before participating in any investment opportunities.