Bengaluru, The Directorate of Enforcement (ED), Bengaluru Zonal Office, has conducted searches at six premises in Bengaluru in connection with alleged large-scale violations of the Foreign Exchange Management Act (FEMA), 1999, involving unauthorised cross-border money transfers through Virtual Digital Assets (VDAs), commonly known as cryptocurrencies, an official statement said on Friday.
The searches were carried out on June 17 under Section 37 of FEMA at the premises of several firms.
According to the ED, the investigation was initiated following complaints alleging large-scale FEMA violations by Bengaluru-based entities using cryptocurrencies to facilitate international money transfers.
Intelligence gathered during discreet inquiries indicated that several unauthorised payment system operators were allegedly circumventing FEMA regulations by using VDAs to undertake cross-border remittances.
The agency said these entities openly advertised services on websites offering instant buying, selling and swapping of cryptocurrencies, promoting them as the fastest way to convert fiat currencies into crypto assets and vice versa for global money transfers.
They reportedly provided “on-ramp” and “off-ramp” services that enable users to convert traditional currencies such as the Indian rupee, US dollar and euro into cryptocurrencies like Bitcoin and stablecoins such as USDT, and later convert them back into cash.
The ED’s investigation revealed a common modus operandi.
Customers intending to transfer money abroad or into India would first register on the platforms and deposit funds into the companies’ bank accounts. The money would then be used to purchase virtual digital assets, particularly stablecoins such as USDT.
These assets were subsequently sold through crypto exchanges in India, and the proceeds were transferred to the intended recipients. In some cases, recipients were also able to claim tax deducted at source (TDS) benefits arising from the transactions.
The agency stated that none of the entities under investigation were authorised by the Reserve Bank of India (RBI) to undertake cross-border money transfers.
They were allegedly operating outside the regulatory framework governing inward and outward remittances, including compliance requirements such as purpose codes and Foreign Inward Remittance Certificates (FIRCs).
Investigators also found that several firms were routing transactions through related entities incorporated in foreign jurisdictions while being controlled and operated from India.
In the case of Mokshagna Technologies Private Limited, the ED alleged that despite lacking authorisation, the company was engaged in large-scale transfer of funds into India using virtual digital assets.
Funds collected from customers in the United States were allegedly converted into cryptocurrencies and transferred to Indian crypto trading platforms.
The assets were then sold through high-volume over-the-counter (OTC) transactions, with the proceeds credited to the company’s bank accounts before being distributed to recipients in India.
The agency claimed that the operation was being controlled from the United States by a key individual with assistance from family members in India.
The investigation into Transak Technology India Private Limited revealed that the company allegedly offered off-ramp services without RBI authorisation.
According to the ED, money deposited in India was converted into virtual digital assets, sold and the proceeds withdrawn outside the country.
The company is also accused of transferring operational profits to its related entity, Transak Inc. USA, through cryptocurrency transactions.
Similarly, Carretx Technologies Private Limited, which operates the “Carret” mobile application, allegedly enabled retail users to trade cryptocurrencies by depositing Indian rupees and receiving corresponding crypto assets in digital wallets.
The ED alleged that the company was also engaged in OTC transactions with foreign-based remittance applications to facilitate unauthorised transfers of funds into India.
Search operations conducted by the agency reportedly uncovered the use of large-volume OTC crypto transactions, shell companies incorporated in known tax havens and foreign-based cryptocurrency trading platforms for unauthorised cross-border fund transfers.
According to the ED, preliminary findings indicate FEMA contraventions involving unauthorised international money transfers exceeding Rs 2,500 crore.
During the searches, restraint orders were imposed on certain bank accounts used by some of the entities.
These accounts reportedly held balances of around Rs 6 crore and were suspected to have been used for unauthorised cross-border transactions.
The Enforcement Directorate said further investigation is underway.
