In dire need of money, Vaishali (name changed) installed an app on her mobile phone on July 23, 2020. Having allowed access to her phone data and furnished the details of her Permanent Account Number (PAN), Aadhaar and bank account, she borrowed a meagre sum of about ?4,500 through the micro-loan digital platform.
In order to pay back the demanded sum, Ms. Vaishali had to take loans from other apps, such as “Money Box”, “Loan Gram”, “My Bank”, “Coco Cash”, “Cashpot”, “Need Rupee” and “Panda Rupee”.
“...She stated that in spite of paying the full amount some unknown persons representing the apps started threatening her to pay the extra amount. They also used obscene words and intimidated her through phone calls, SMS messages, WhatsApp, etc. to have sexual intercourse with them,” alleges the Enforcement Directorate (ED), which has?charged seven entities and five individuals?in the “Chinese loan app” case.
The accused would also threaten to upload the victim’s photos on “adult” websites. When she ignored the threats, her images with her contact number were circulated in a WhatsApp group created by using her phone contact list. The chargesheet records multiple such instances.
In another case, Iqbal also took loans from several apps to clear the previous debt. The terms and conditions were modified while sanctioning the loan such that the duration was reduced from 92 to seven days. He received messages that his Aadhaar and PAN would be blocked. His relatives were threatened and his photographs bearing words like “?Chor” (thief) and “Fraud customer” were circulated. His women contacts were targeted and sent obscene messages.
Explaining the?modus operandi, the ED alleged that the apps usually deducted 30%-40% of the sanctioned loan amount as processing fee. “A perusal of sample loan sanction letters by [accused] X10 Financial Service in collaboration with [accused] Mad Elephant Network Technologies revealed that the effective interest rate...comes to 2,233% per annum,” an official said.
Quoting a report by the Bengaluru Police, the agency said owners of the apps were some front-end Indian entities, for which instructions came from Chinese citizens. They entered into agreements with non-bank financial companies (NBFC) for giving out loans. Each entity had floated several apps that were installed, accessed, used and monitored from cloud-based servers in China.
Among those charged by the ED are “Chinese controlled” Mad Elephant, Baryonyx Technology and Cloud Atlas Future Technology. Three NBFCs, identified as X10 Financial Services, Track Fin-ed and Jamnadas Morarjee Finance, besides payment gateway Razorpay Software, have also been listed. Mad Elephant was represented by its directors Vidyavati Dhami and Chinese national Yan Peng Qu.
A look-out circular has been opened against fugitive Qu. In her statement to the agency, Ms. Dhami allegedly said that she had joined as an HR manager. She was also made a director in Yoyo Cash Technology, registered in October 2020. The same year, without any appointment letter, she was told to operate as a director of Mad Elephant by a woman called “Ms. Jin”, who was from a Hong Kong-based parent company, Rumming Tech.
Ms. Dhami allegedly told the ED that YOYO cash and Mad Elephant operated as service providers to X10 Financial Services and that Mad Elephant helped in loan recovery, provided new borrowers and their KYC (know your customer) documents. She said Ms. Jin and Qu, who went back to China in November 2020, managed the companies from there. Call centres, with about 250 employees, had been set up in India to deal with the borrowers.
The accused NBFCs would receive their share, ranging from 0.4% to 1.5% of the total disbursement, or a minimum commitment on a monthly basis, of the amount specified in the agreements, whichever was higher.
As alleged by the ED, in the case of X10 Financial Services-Mad Elephant, loans totalling ?306.97 crore were sanctioned on an investment of about ?9.74 crore and ?89.95 crore was earned, while bad debts amounted to ?38.05 crore. The final share of Mad Elephant was ?46.76 crore, and the rest went to X10 Financial Services. Baryonyx Technologies registered pay-in transactions worth over ?665 crore and pay-outs to the tune of ?594 crore. Jamnadas Morarjee Finance, which had an agreement with Cloud Atlas, had recorded transactions amounting to over ?42.44 crore.