Hundreds of complaints and several suicides have forced police in different cities to crack down on Chinese loan apps. As investigators dug deep, they found that the same Chinese entities also ran several gambling and betting apps. Many, including some Chinese nationals, have also been arrested in connection with the cases.
In August last year, Hyderabad police busted an online gaming racket and arrested two Indians and a Chinese national. One of the Indians arrested was Dheeraj Sarkar, a 25-year-old from Assam. His lawyer Pankaj Singh alleges that his client was framed in the case by Chinese directors of firms that are now also said to be linked to the mobile loan lending scam.
“The Chinese entity, through their advocates, tried to take control of the matter by offering free legal aid to the family members and pressuring them. They also asked us to give a declaration of ‘no objection’ certificates through their advocates,” Singh said.
Based on Singh’s version and other sources related to the case, the modus operandi seems to be as described below.
In 2018, a Chinese company M/s Beijing Tomorrow Power Company and its promoters Ling Yang, Ming Yang and Jinling Wan, and other directors Liu Yang and Yan Hao, with the help of some Indian chartered accountants floated multiple Indian companies.
Initially, dummy Indian directors were used to incorporate the companies, and after some time, Chinese nationals came down to India and took directorship in these firms. Some locals were also hired.
Bank accounts were opened with HSBC and trade accounts with online wallets, namely Paytm, Cashfree, Razorpay, etc. These online wallets had a lack of diligent mechanisms and their non-reporting of suspicious transactions to the regulatory authorities helped the company to launch pan-India operations.
Once bank accounts were opened, the Internet access credentials were couriered by the Indian employees to China and major payment instructions came from the owners ensconced in China.
The company floated a large number of similar-looking websites, which were hosted through United States-based web infrastructure company Cloudflare. These websites attracted gullible persons to become members and place bets on various online apps, which promised lucrative rewards on simple games of chance.
Further, networks of agents were recruited to attract new customers/members. These agents created closed Telegram and WhatsApp groups and attracted lakhs of gullible Indians. Referral codes were used to privately invite new members. This also helped the sponsoring member to earn commission.
Paytm and Cashfree were used to collect money and pay commission to these agents. Hundreds of websites were created to promote online betting under the garb of e-commerce. All websites were not activated daily. Some were activated for placing bets and the information on daily active websites was shared to members using Telegram.
The overall scams look to have been propagated via gaming/betting companies and mobile loan application firms. The Enforcement Directorate has registered a case against companies Dokypay Technology Private Limited, Linkyun Technology Private Limited and others, based on an FIR filed by Telangana Police.
The ED has confirmed that these companies moved funds worth crores overseas using the “lax regulatory” mechanism of online wallets. It will now investigate the instant loan app case together with the online betting case as both incidents involve similar stakeholders and modus operandi.
Dokypay and Linkyun came under the ED radar in September 2020 when employees of these firms were arrested over a betting racket in Hyderabad. The other companies under the radar are SpotPay, AOKE Club, Nabloom Technologies Private Limited, Liufang Technologies Private Limited, Hotful Technologies Private Limited and Mashangfa Technologies Private Limited.
The last four companies are directly under the scanner for the mobile app loan scams. None of their office premises are now occupied. Interestingly, all the four firms were incorporated around the same time in January last year in Bengaluru and their directors are two persons named Palle Jeevana Jyothi and Selva Raj Singi.
Chennai resident Nataraj (name changed), 35, said he’d availed Rs 5,000 from a loan app. However, only Rs 3,500 was credited to his bank account. Upon delay in repaying, the app staffs asked him to download another loan app to get cash to pay his existing dues. Over time, Nataraj’s loans had accrued up to Rs 4.5 lakh across 45 mobile money lending applications.
Sudeep (name changed), who works as an assistant manager in a private insurance company in Bengaluru, suffered eight months for a loan he took through several apps. The total amount with interest stood at Rs 6.38 lakh, while the actual money he loaned was only Rs 73,000.
There are several such stories from across India. After lockdown in March last year, many businesses shut abruptly, leaving employees in the lurch, and a perfect timing for Chinese loan sharks to target gullible Indian borrowers.
Google Play Store has a plethora of such lending apps such as Bubble Loan, Liquid Cash, Cash Bee, Rupee Factory, Paisa Loan, SnapIt Loan, Rupee Plus, Pan Loan, In Need, Cash Port, Wow Paisa, Gold Bowl, Ok Cash, Udhaar Loan, Go Cash, FlashCash, Cash Pot, One Hope and Bily Cash.
Many of these applications advertise across social media platforms to lure customers. They charge ridiculously high interest rates (from 35-65 per cent). They are illegal and are not registered lenders as they are neither connected to banks nor non-banking financial companies (NBFCs).
Investigators reveal that upon downloading these loan apps and applying for a loan, the phone numbers of the borrowers/customers and their family members are instantly shared by the lending firm to their tele-callers and loan agents. Defaulters are threatened with messages containing fake FIR case numbers.
The most attractive thing about these apps is that the loan amount is instantly transferred to the borrowers’ account upon approval. These mobile applications mandatorily require access to contacts, image and video gallery in the phone. The major documents required are Aadhaar and PAN card images. The security fall back is the access to contacts and gallery.
At least 60 such loan apps available on Google Play Store were not registered or recognised by the Reserve Bank of India (RBI), which makes their operation illegal. The RBI has now cautioned individuals and small businesses against falling prey to the growing number of unauthorised digital lending platforms or mobile apps.