Hashpe Crypto Scam: How Promoters Defrauded Investors of 112 Crores

The ED has uncovered a 112-crore Ponzi scheme run by Hashpe, involving fictitious crypto tokens and diverted investor funds. Four promoters have been arrested, and assets worth over 14 crore have been provisionally attached by the agency.

The Anatomy of the Hashpe Cryptocurrency Fraud

The alleged Rs 112-crore cryptocurrency fraud linked to the Hashpe platform followed a familiar Ponzi scheme pattern – create tokens at virtually no cost, assign them fictitious valuations, attract investors with promises of extraordinary returns, use fresh investments to pay earlier participants and eventually divert a substantial portion of the funds into personal assets. The investigation by the Enforcement Directorate (ED) has brought out the alleged lifecycle of the scheme, which began with the creation of fictitious cryptocurrency tokens and an aggressive promotional campaign before turning into a multi-level marketing operation that eventually collapsed when withdrawals were blocked.

ED's investigation in the case has revealed that the promoters created cryptocurrency tokens, including TCX and Hashpe, without any corresponding cost of acquisition and assigned them artificial values. "The platform displayed profits to investors despite the absence of genuine trading activity to support the returns being promised. Operating through its website, 'hashpe.io', the platform presented itself as a cryptocurrency-based investment opportunity, offering daily returns of one per cent, returns of up to three times the investment, referral commissions and additional rewards," ED officials said. "The next stage involved aggressive marketing to build credibility and attract a wider investor base."

Marketing Tactics and Operational Structure

As per the investigators, the promoters allegedly used "celebrity endorsements, luxury cars, gold, foreign cruises and promotional events to project the platform as a lucrative investment opportunity." A multi-level marketing network was established to expand the scheme, with agents designated as 'Leaders' incentivised through referral commissions to bring in more investors, they said. The promoters, identified as Imran Basha, Hitesh Kumar and Syed Usman, alias Babu, along with Dhamodharan and other associates, allegedly induced members of the public to invest through cash payments, bank transfers and cryptocurrency assets, with Rs 112.91 crore mobilised through the scheme, said the agency officials.

The ED investigation revealed that investments amounting to Rs 112.91 crore were mobilised through the alleged scheme, and that "the funds were collected through multiple channels, including bank accounts, cash transactions and cryptocurrency wallets." "The money flow allegedly followed a classic Ponzi mechanism. Funds received from new investors were utilised to make payments to earlier investors and distribute commissions among agents, creating an impression that the platform was generating regular profits." However, the officials said, the displayed returns were not backed by genuine trading activity, according to the agency.

The investigation further revealed that the funds were routed through the bank accounts of HIFY Circle and other associated persons and entities, besides cryptocurrency wallets. Instead of being utilised for genuine investment activities, a substantial portion of the money was allegedly diverted towards personal expenses, repayment of loans, commissions, promotional events and acquisition of assets. The ED identified proceeds of crime amounting to Rs 49.54 crore during the investigation. The scheme eventually ran into trouble when withdrawals were blocked and the platform was disabled, leaving investors unable to recover their investments. The failure of the payment cycle exposed the alleged Ponzi structure, in which payments to earlier investors depended on the continuous inflow of money from new participants.

ED Action and Asset Attachment

Following the registration of an FIR by the Puducherry Cyber Crime Police Station under various provisions of the Bharatiya Nyaya Sanhita, 2023, and the Information Technology Act, 2000, the ED initiated a money laundering investigation. As part of the probe, the ED's Chennai Zonal Office-II conducted searches on September 1 at premises linked to Hashpe, its promoters and associates. Subsequently, Imran Basha, Hitesh Kumar, Syed Usman alias Babu and Dhamodharan were arrested under Section 19 of the Prevention of Money Laundering Act (PMLA), 2002. All four accused are presently in judicial custody.

In the latest enforcement action, the ED filed a prosecution complaint before a special PMLA court in Puducherry on October 30 and provisionally attached movable and immovable assets worth Rs 14.16 crore. The attached assets include properties in Tamil Nadu, Haryana and New Delhi, a BMW car and balances in bank accounts. The attachment forms part of the agency's action to secure assets allegedly acquired from the proceeds of the fraud, while the prosecution complaint places the alleged money laundering activities before the special court. The case illustrates how fictitious digital assets, artificial valuations, high-return promises and a referral-driven investment network can allegedly be combined to create the appearance of a profitable cryptocurrency business, while fresh investor money sustains the payment cycle until the scheme collapses. (ANI)

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