The Directorate of Enforcement (ED), Bengaluru Zonal Office, conducted searches at six premises in Bengaluru on 17 June 2025, uncovering alleged large-scale violations of the Foreign Exchange Management Act (FEMA), 1999, involving unauthorised cross-border money transfers routed through Virtual Digital Assets (VDAs), commonly known as cryptocurrencies. Preliminary findings indicate FEMA contraventions exceeding ₹2,500 crore, according to an official ED statement released on Friday.

How the Alleged Scheme Operated

The ED said the investigation was triggered by complaints pointing to systematic FEMA breaches by Bengaluru-based entities. Intelligence gathered during discreet inquiries suggested that several unauthorised payment operators were allegedly bypassing FEMA regulations by using VDAs to execute cross-border remittances — without any approval from the Reserve Bank of India (RBI).

The firms reportedly advertised services openly on websites, promoting instant buying, selling, and swapping of cryptocurrencies as the fastest method to convert fiat currencies into crypto and back again for global transfers. They allegedly offered 'on-ramp' and 'off-ramp' services, enabling users to convert currencies such as the Indian rupee, US dollar, and euro into assets like Bitcoin and stablecoins such as USDT, and subsequently back into cash.

A common modus operandi emerged: customers would register on these platforms and deposit funds into the companies' bank accounts. The money was then used to purchase VDAs — primarily stablecoins — which were sold through crypto exchanges in India, with proceeds transferred to intended recipients. In some cases, recipients reportedly also claimed tax deducted at source (TDS) benefits arising from these transactions.

Key Entities Under Investigation

Mokshagna Technologies Private Limited allegedly facilitated large-scale inward fund transfers to India using VDAs, without RBI authorisation. Funds collected from customers in the United States were reportedly converted into cryptocurrencies and transferred to Indian crypto trading platforms, where they were liquidated through high-volume over-the-counter (OTC) transactions before being credited to company accounts and distributed to recipients. The ED claimed the operation was being controlled from the US by a key individual, assisted by family members in India.

Transak Technology India Private Limited allegedly offered off-ramp services without regulatory clearance. According to the ED, money deposited in India was converted into VDAs, sold, and the proceeds withdrawn outside the country. The firm is also accused of routing operational profits to its related entity, Transak Inc. USA, through cryptocurrency transactions.

Carretx Technologies Private Limited, which operates the 'Carret' mobile application, allegedly enabled retail users to trade cryptocurrencies by depositing Indian rupees in exchange for crypto assets in digital wallets. The ED further alleged that the company conducted OTC transactions with foreign-based remittance applications to facilitate unauthorised inward fund transfers into India.

Shell Companies and Tax Havens

Investigators also found that several firms were routing transactions through related entities incorporated in foreign jurisdictions, including known tax havens, while being controlled and operated from India. The use of large-volume OTC crypto transactions, shell companies, and foreign-based trading platforms was uncovered during the search operations.

None of the entities under investigation were authorised by the 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).

Restraint Orders and Next Steps

During the searches, the ED imposed restraint orders on certain bank accounts used by some of the entities. These accounts reportedly held balances of around ₹6 crore and are suspected to have been used for unauthorised cross-border transactions. The Enforcement Directorate has stated that further investigation is underway.

This action comes amid growing regulatory scrutiny of India's cryptocurrency ecosystem, where the absence of a comprehensive legal framework has left enforcement agencies relying on existing FEMA and anti-money-laundering statutes to police cross-border crypto flows.