The ‘instant loan’ swindlers’ list: Chinese owners, Indian proxies & ghost addresses

Wading through the maze of shell companies throws up names of benamis – people who, in another context, could just as well have been the victims of these lending apps’s predation.
The ‘instant loan’ swindlers’ list: Chinese owners, Indian proxies & ghost addresses
The ‘instant loan’ swindlers’ list: Chinese owners, Indian proxies & ghost addresses

The gate of Selvaraj Singi’s house in the Kothagudem town of Khammam district in Andhra Pradesh is firmly shut. Though one can see faint movements inside the house, no one comes to open the gate. Curious neighbours confirm that Selvaraj is a teacher employed at a private school nearby. But according to the Registrar of Companies, Selvaraj is a director in four technology companies including Nabloom Technologies Private Limited. All four are being investigated by the Hyderabad police for running dubious loan apps in connivance with Chinese individuals, and are accused of harassing four borrowers, driving them to die by suicide. 

Cut to Bengaluru where the busy Residency Road in the heart of the city is home to several businesses. One of them is ‘Business Hut’, a co-working space that seats around 50 people every day. When TNM reached their property to find one of their 'clients' Nabloom Technologies Private Limited, they told us that there's no cubicle reserved for Nabloom at Business Hut, nor have they met its founders/directors. In 2019, a chartered accountant from Delhi representing Selvaraj Singi paid money to book a space and use the address for the company registration. The chartered accountant in turn told TNM that he does not know Selvaraj directly, but a ‘contact’ had asked for help.

Law enforcement agencies took notice of instant loan apps only in December 2020 when Telangana reported a series of suicides by those who had defaulted on loans they took from these apps. The users had taken micro loans – amounts as low as Rs 1,000 – but found themselves paying high-interest rates and processing fees. Those who defaulted faced inhuman harassment by recovery agents – if some were humiliated in front of friends and acquaintances, others had their pictures morphed and shared on social media as blackmail. 

Suicides and cases of harassment were also reported from Andhra Pradesh and Tamil Nadu. As of today, Hyderabad, Cyberabad, Chennai, and Bengaluru police teams are investigating hundreds of dubious loan apps, lakhs of bank transactions and a maze of proxy directors. 

And every new detail they unearth is leading them to suspect a strong involvement of Chinese nationals and companies. 

Who runs and owns these apps?

Selvaraj Singi is a director in four companies according to his DIN (Director Identification Number) – Nabloom, Liufang, Hotful, and Mashangfa. Liufang’s registered address is in a building in Bengaluru’s Ejipura. The office is closed, even the sticker with the name of the company has been ripped off.

“They all left one night and never came back. The police came here to ask about them,” informs the watchman.

Liufang office in Bengaluru

But Selvaraj Singi is just a rubber stamp. His name was used by his son Madhu Kumar Singi. 

Two Chinese nationals and an Indian national approached Madhu with a lucrative offer sometime in 2019 – a big jump in his career from being a telecaller calling people to recover loans, to heading call centres.

Madhu Singi has told the Hyderabad police that he had responded to a job advertisement in a leading jobs portal and was introduced to Nagaraj Prem Kumar. Nagaraj was already running three call centres in Gurgaon for Aglow fintech – another company. 

Nagaraj along with two Chinese women – Qui Yaan Yaan or Jennifer as she was called, and Angela – set up Aglow in 2019, and four more companies in 2020. In January 2020, the women flew back to China, taking Madhu along for training purposes. "While the women did not return to India, Madhu did after a month and started the three call centres in Hyderabad, employing around 600 people. Nagaraj and another Chinese national called Zhu Wei (Lambo) were in charge of the entire operation of running 37 odd apps," says KVM Prasad, Assistant Commissioner, Hyderabad Cyber Crime.

A look at the directors of these companies – and others that run digital lending apps – throws up a curious ‘coincidence’. Several of the people are listed as directors of multiple companies in the sector. Two of them – Palle Jeevana Jyothi, and Selvaraj Singi– turn up as directors in four companies, while another person Manjunatha Nutham Ram is a director in 15 companies.

The lockdown in March posed a small hurdle, but operations started full swing again in July. By then, a maze of shell companies was created – and most of the directors are benamis, stand-in benefactors earning small sums of money, while the actual owners of these companies remain unknown. Selvaraj, Jeevana, and Manjunatha are people who, in another context, could just as well have been the victims of these lending apps’s predatory policies. 

Madhu Raj Singi and Lambo’s operation is just one example. Currently, the Hyderabad police is investigating six companies, and the Cyberabad police one company; the Chennai Crime Branch is probing a company based out of Pune. The Bengaluru Crime Branch has filed three FIRs, and is investigating four companies. 

The investigations are all moving along simultaneously, but one thing that all investigators TNM spoke to said is – they’ve just scratched the surface of the issue. “There are many financial transactions and we are waiting for clarity from the RBI and from various banks. We suspect that these companies have also got money from hawala transactions,Non Banking Financial Companies (NBFC), and even from online gambling,” says Avinash Mohanty, Joint Commissioner, Central Crime Station of Hyderabad.

The call centres were mainly based in Bengaluru, Pune, Hyderabad and Gurugram. If the call centre was in one city, the company was most likely registered in another city. But the bank accounts in all these cases were being operated by the handlers in China. 

The police crackdown on the Chinese-owned apps has, so far, resulted in the arrest of seven Chinese nationals and over 35 Indians by four police forces in south India. Police say they are still investigating the web of companies, and the Enforcement Directorate too has started a probe. 

But the big mystery remains: which are the Chinese companies behind these fraudulent operations in India? Who were Jennifer, Angela and Lambo reporting to? 

How digital lending apps work

Traditionally, banks and NBFCs that provide loans have several rules in place – and require many documents from their clients in order to approve loans. Typically, loans are for specific uses – like a home loan, vehicle loan etc. And while personal loans are also available, there is a threshold below which the institutions will not lend to customers. 

Digital lending apps, on the other hand, have no such floors. They provide micro-loans – as little as Rs 1,000. They also have a shorter repayment period, and a much higher interest rate. They typically also charge 14% to 15% of the loan amount as processing fee, and a standard interest rate of 1% a day on average. The interest rates also compound on a weekly or fortnightly basis. 

When one downloads one of these apps from the Google Play Store or iOS App Store, the app demands some permissions that are, logistically, simple to provide: access to your phone contacts, access to your messages, and other permissions that we are used to routinely providing for apps we download. Although, logically, there is no need for a lender to know who’s in your phonebook, these apps cannot be downloaded without these permissions. Where traditional lenders would ask for a guarantor or proof of property, your personal data – all of it – is the collateral that these apps collect. 

They also demand other information that is par for course in our daily lives: Aadhaar, PAN number, ID proof, bank account details. 

And while any of this information in isolation can be considered ‘harmless’ by the lay person, all of it combined is a vulnerability ready for exploitation by the lenders. 

Similar MO, different market

Dhiraj Sarkar, 25, from Assam was arrested from Haryana in August 2020 by the Hyderabad police for his role as one of the Directors at Dokypay, a gambling app operated by Linkyun technologies private limited, a subsidiary of a foreign owned company. The Hyderabad police arrested one Chinese national and three Indians accusing them of cheating online gamers of over Rs 1,100 crore through this gaming app. 

His lawyer Pankaj Singh, however, claims that Dhiraj merely worked in branding and marketing; he was never the Director of the gambling  app.

“My client wasn’t aware that he was the director of the company until his arrest. He admits that he signed a few documents without question but the company was completely operated by the Chinese and my client was merely an employee,” says the lawyer.

Dhiraj is presently at Cherlapally jail and the cases against him are being investigated by the Telangana police and the Enforcement Directorate. 

“We have many reasons to suspect a China connection,” says Avinash Mohanty. “We have unearthed at least 350 bank accounts from which transactions were made for instant loans. But many of these accounts are being operated by users who live abroad, even usernames and passwords are in Mandarin.” 

“Most of the websites for these companies were started by their Chinese owners,” he adds.

The modus operandi

Balaji Vijayaraghavan is a student of criminology based in Chennai, and a victim of an instant loan app fraud. He is also a member of SaveIndia Foundation, a team of cybersecurity professionals investigating instant loan apps operating in India.

The researcher says instant loan apps gained entry to India through Fintech expos held annually in Indonesia, Malaysia and Singapore.

“While the events are held in a positive spirit, a few exhibitors from China demonstrate their instant loan apps there and a few Indian businessmen get attracted to the business model. The Software Development Kits (SDKs) are then either sold at a nominal rate or with equity for the Chinese that invest in the Indian firm,” says Balaji.

Chinese nationals looking to set up instant loan app companies in India, he says, have been using proxies as directors and then taking the help of chartered accountants to set up companies. Balaj alleges that one such CA helped Chinese investors float 40 companies; 12 of those companies were instant loan apps against whom police have now booked cases. “We have shared details of these CAs with the Hyderabad cyber crime police,” he adds.

Staying under the radar

These instant loan companies declare themselves to be IT consultants or service providers in their documentation with the Registrar of Companies (RoC) under the Ministry of Corporate Affairs. 

While disbursing loans and collecting them back, transactions carried out are many in number but small in terms of the value of the transaction. Srikanth L of Cashless Consumer, a consumer collective working on increasing awareness around digital payments, says that some of them use digital payment apps such as Google Pay, Paytm, among others and as per the police, digital payment gateway Razorpay was also used by many for transactions. 

In June 2020, the RBI had come out with a notification bringing in guidelines for digital lenders linked to NBFCs. However, the guidelines don’t apply to the ones that are not registered as such, and barely affected these apps. Under Section 45-1A of the RBI Act 1934, any non-banking financial company requires proper registration to operate.

A company is allowed to lend by partnering with a bank or a non-banking financial company. According to DLAI, there are several defunct, yet valid NBFC licences. Several companies are partnering with such firms to be able to lend.

Anuj says that since these loan apps don’t really do KYC or check a person's credit score, they technically don’t even need an NBFC at the back-end. 

Further, these companies manage to get away because they are set up and operate as shell companies. There is no real physical address, directors are proxies, names are changed frequently, holding structures and board members constantly change, making it easy for them to stay under the radar.  

With inputs from Pooja Prasanna

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