As a researcher with a background in financial markets and a personal experience of witnessing the devastating impact of Ponzi schemes on unsuspecting investors, I am deeply concerned about the recent investigation into the Highrich online group and the alleged crypto Ponzi scheme they are suspected of operating. The scale of the fraud is staggering, with approximately ₹1,500 crore ($179,532.75) reportedly amassed from investors under false promises of high returns and a 15% annual interest rate.
The Enforcement Directorate (ED) of India has frozen approximately ₹32 crore ($3.83 million) in cash deposits and other assets linked to the Highrich online group.
The group is under investigation for allegedly operating a crypto Ponzi scheme.
According to The Hindu’s report, based on information from reliable sources, the ED discovered that K.D. Prathapan and Sreena Prathapan’s Highrich Group amassed around ₹1,500 crore ($179,532.75) from investors by promising them high returns and an annual interest rate of 15%.
The Executive Director (ED) alleges that the company’s key figures and shareholders are involved in illicit transactions of cryptocurrencies on multiple platforms and have been marketing their own digital currency, HR Crypto Coin, unlawfully.
As a researcher studying the allegations made by the Enforcement Directorate (ED), I can tell you that they claim these cryptocurrencies were used in a Ponzi scheme, where potential investors were lured with alluring promises of substantial returns. These returns, as per the ED’s assertion, were sourced from contributions made by newly recruited investors. Additionally, investors were offered an incentive of 30% direct referral fees to bring new customers into the supposed scheme.
As an analyst, I have uncovered some significant developments in the ongoing ED investigation. starting from January, approximately ₹260 crores ($31.12 million), with ₹212 crores ($25.4 million) being a part of it, have been reportedly seized from 55 bank accounts belonging to the company and its associates. Additionally, the investigation has unearthed ₹15 crores ($1.8 million) worth of immovable properties that are believed to be linked to the promoters and other key individuals, suspected of being acquired using proceeds from illicit activities.
As a researcher investigating financial irregularities, I’ve uncovered multiple complaints from the Kerala Police that led me to execute searches at HighRich Smartech Pvt. Ltd., HighRich Online Shoppe Pvt. Ltd., and associated entities. The result of these raids has amounted to approximately ₹260 crore ($31,119,010.00) in frozen or seized assets.
Combatting crypto Ponzi schemes
Ponzi schemes can deceptively appear as legitimate investment opportunities. But in reality, the profits paid to early backers come from funds contributed by newer investors, instead of earning revenue through genuine business activities.
Such schemes continue to pose a significant threat to the stability of international financial systems and the confidence of investors. The latest high-profile incidents serve as a reminder of the need for strong regulatory actions to curb and lessen the damage caused by these deceitful activities.
In June 2022, Celsius Network, a previously small-scale cryptocurrency lending platform, unexpectedly stopped all transactions and ultimately declared bankruptcy under Chapter 11. The firm had extended loans worth $8 billion to clients and oversaw assets valued at around $12 billion. An internal communication described their operations as bearing similarities to a Ponzi scheme.
As a crypto investor, I’ve experienced my fair share of ups and downs in the market. However, one particularly noteworthy event left me concerned – the filing for Chapter 11 bankruptcy by FTX, once the second-largest cryptocurrency exchange globally, in November 2022. This unfortunate turn of events came to light when it was disclosed that customer assets had been utilized for risky investments, resulting in a significant financial deficit.
The SEC is vigilantly working to thwart Ponzi schemes, as these deceptive investment strategies carry substantial dangers for individual investors and the broader financial market.
U.S. Senator Elizabeth Warren has raised alarm about the absence of regulatory oversight in the cryptocurrency market. She advocates for increased supervision from the Securities and Exchange Commission (SEC) to protect investors and maintain financial security. However, her statements have sparked a heated argument within the crypto community, with certain figures expressing anxiety over the possible consequences of a more active SEC role.
Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has been increasingly vocal about the need to oversee the cryptocurrency market. He supports bringing cryptocurrencies under the existing financial regulatory structure.
As a financial analyst, I share the same perspective with Treasury Deputy Secretary Wally Adeyemo and others regarding the importance of strong regulations to prevent the misuse of cryptocurrencies in unlawful activities like sanctions evasion and terrorist financing.
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2024-06-16 20:54