Mumbai: The Enforcement Directorate (ED) has launched an investigation into OctaFX, a Cyprus-based forex trading platform, for its alleged involvement in illegal betting operations and money laundering activities. Popular among Indian traders, OctaFX is suspected of using forex trading as a front to launder proceeds from illegal betting.
The ED's probe has revealed that funds from illegal betting activities are being integrated into OctaFX’s forex trading operations. This process, commonly referred to as "layering" in money laundering schemes, allows the platform to mix illicit funds with legitimate transactions, making it difficult for authorities to trace the money trail.
ED's probe has exposed that platforms like OctaFX, linked to illegal betting, employ various tactics to integrate their funds into forex trading operations. These methods aim to obscure the origins of their money and manage customer losses deceptively.
Customer Payments:- When customers experience losses, companies similar to OctaFX may use their betting funds to issue payments, thereby maintaining customer satisfaction and trust. This tactic, though temporary, helps in keeping clients content and less suspicious of the source of their returns. This short-term strategy hides the illicit source of the funds while placating customers.
Offering Fake Profits :-One prevalent method involves offering fake profits. OctaFX allegedly uses betting money to create the illusion of financial gains for their customers, misleading them into believing that their investments are performing well. This façade helps in giving the impression that any incurred losses are being covered adequately.
Bonuses and Promotional Offers:-OctaFX attracts and retains clients through bonuses and promotional offers funded by betting earnings. These incentives foster the false belief that clients' financial situations are improving, despite the underlying illegality.
Fake Transactions and False Performance:- OctaFX and other forex Companies may also engage in showing fake transactions and false performance metrics in customer accounts. This technique creates a misleading picture of investment security and success, while the real source of funds remains concealed.
Customer Payments:-If customers incur losses, companies might use betting funds to make payments to them. This recovery effort is often made to maintain customer satisfaction and trust.
Additionally, firms offer fake customer service and support to project a veneer of reliability and responsiveness, further masking the true nature of their operation
Through these methods, companies like OctaFX allegedly attempt to cover up their illegal activities and mask the origins of their funds. However, such practices are illegal, ED officials confirmed that the PoC in these cases involves approximately Rs.10,000 crore, impacting around 2 crore users nationwide.
Investigators have found that the octraFX platform allegedly encourages users to conduct transactions via cryptocurrency wallets, complicating efforts to track these digital transactions. OctaFX’s use of multiple foreign and local bank accounts adds another layer of complexity to its operations, making the investigative process more challenging.
The agency suspects that OctaFX has been involved in significant violations of the Foreign Exchange Management Act (FEMA), raising concerns about its legality and transparency in India. According to the Sources ED have found that the platform has been channeling substantial amounts of money outside the country through unauthorized payment gateways, potentially violating the Reserve Bank of India’s (RBI) strict foreign exchange trading norms.
The company operates by luring traders with online advertisements and high-return promises. Once users deposit funds via local payment gateways, these transactions are reportedly diverted through third-party wallets to mask their origins. OctaFX is alleged to use several tactics to obscure its operations.-
Illegal betting operations often employ sophisticated tactics to mask their illicit earnings as legitimate transactions. One key strategy is the creation of fake e-commerce websites, which serve as a front to showcase illegal profits as lawful income from forex trading. To further obscure the origin of these funds, they implement a process known as layering, where the money is split into multiple segments and funneled through a maze of bank accounts and financial systems, making it nearly impossible to trace.
A deceptive trading practice called wash trading is also commonly used. Here, the same currency is bought and sold repeatedly, fabricating high transaction volumes to disguise illegal funds as legitimate forex trades. Additionally, these operations rely on complex corporate structures, involving shell companies and law firms, to facilitate the transfer of illegal money across various accounts, adding another layer of opacity.
Cryptocurrency is another tool in their arsenal, exploited for its anonymity, making the tracking of financial movements exceedingly difficult. In parallel, secret transactions and chit funds are employed, where betting proceeds are broken down into smaller amounts and discreetly funneled through hidden channels, only to be later masked as forex trading activities.
Through these methods, entities like OctaFX attempt to launder their illicit funds under the guise of legal forex operations. However, once these schemes are uncovered, they face severe legal repercussions.