Enforcement Directorate unearths ‘cloud particles’ fraud

As its modus operandi, the private firm committed fraud by allegedly selling ‘cloud particles’ to people and leasing them back on giving rental income to investors

The Enforcement Directorate has unearthed a new modus operandi allegedly used by a private company and its affiliates to commit fraud on the pretext of selling “cloud particles (servers)“ to people and leasing them back on the assurance of providing rental income to the investors, according to the agency.

On November 26, the Central agency conducted searches at five locations in Mohali (Punjab) and Noida (Uttar Pradesh) in a case involving Vuenow Marketing Services Limited, its related entities, and others under the Prevention of Money Laundering Act (PMLA). It has got 67 bank accounts of the suspect entities and persons frozen to safeguard the interests of thousands of investors.

During the preliminary investigations, the ED found that over 25,000 investors have purportedly bought “cloud particles” and the group has so far received about ₹2,200 crore in lieu of the sales.

As claimed by the agency, Vuenow Marketing Services in connivance with other entities comprising Vuenow Infotech Private Limited, Zebyte Infotech Private Limited, and Zebyte Rental Planet Private Limited induced people to buy “cloud particles” and leased them back on the promise of high returns by renting out the data storage services to others.

“Fraudsters dupe the investors over a longer period of time and the scam is hard to detect as the victims continue to benefit from high periodic returns on their investments in the cloud particles, unaware of the fact that there is no such digital infrastructure in existence,” an official said.

The ED had initially launched an inquiry under the Foreign Exchange Management Act (FEMA) based on inputs about suspected irregular and unauthorised foreign remittances by the group, apart from the possibility of cheating. Last month, it carried out searches at 14 locations and seized ₹30.50 lakh in cash including foreign currency digital devices, and documents.

“Key promoters of the Vuenow group did not join the search proceedings. Evidence gathered during FEMA investigation revealed alleged cheating of investors by way of promising them higher returns on leasing of space,...the group was promising unrealistic returns...,” the official said.

It is alleged that the returns promised were as high as 40% per annum, but to provide the requisite number of cloud servers either on sale or lease, they did not have the proportionate infrastructure. “This was established during the physical verification conducted by the ED during the search of their data centres,” said the official, adding that the agency also suspected diversion and layering of funds.

The ED shared its findings with Uttar Pradesh’s Gautam Budh Nagar (Noida) police, which registered a case under various provisions of the Bharatiya Nyaya Sanhita (BNS). Subsequently, the Directorate started probing the alleged money laundering angle. “The police will be investigating the matter from the perspective of alleged cheating, criminal breach of trust, and criminal conspiracy,” the official said.

Published - November 30, 2024 03:36 pm IST