The Enforcement Directorate (ED) has arrested two Chinese nationals, named Xiao Ya Mao and Wu Yuanlun, in connection with a money laundering case related to digital loan apps operating in India.

The accused were detained in Tiruchirappalli, Tamil Nadu under the Prevention of Money Laundering Act (PMLA), 2002. The Principal Sessions Judge, Chennai remanded them in judicial custody for three days, extending their judicial custody till November 29, 2024.

As part of the ongoing investigation, the ED has frozen 96 bank accounts in Delhi NCR, Haryana, Punjab, Gujarat and Chandigarh with a total balance of Rs 19.43 crore.

The case centered around several Chinese-run digital lending apps that offer short-term loans at exorbitant interest rates. The apps charged massive upfront processing fees, sometimes as high as 30%, and exploited borrowers through threats and smear tactics. Borrowers were forced to share personal information such as photos, videos, bank details and contact lists when they applied for micro-loans of between Rs 5,000 and Rs 10,000. When they failed to repay, lenders resorted to harassment, using borrowers’ personal details to extort money.

Investigation revealed that the accused, arrested on November 13, had set up two companies, M/s Toucolor Technologies Private Limited and M/s Truekindle Technology Private Limited, in 2020. These companies were operated using fake Indian directors to sign official documents.

The accused allegedly created the cryptocurrency wallets on the WazirX platform under the names of Indian executives. Between August and December 2020, they transferred funds worth Rs 3.54 million in cryptocurrencies, which were later converted into Indian currency and used to fund loan payments. The recovered loan amount totaling Rs. 5.02 Crore, was also channeled into cryptocurrencies and transferred to foreign wallets in Hong Kong, laundering the proceeds of crime.

In some cases, borrowers’ photos were turned into obscene images and shared on social media platforms, pressuring them to repay them. In others, borrowers were forced to take out new loans to repay existing ones, trapping them in a cycle of debt.