400 Cheque Books, 200 Sims: Inside Rs 40 Crore IPO Scam In Mumbai

The ED conducted searches at multiple locations in Mumbai as part of investigations against a company that duped investors after providing false assurances to set up data and digital learning centres in small towns, an official said on Tuesday.

The Enforcement Directorate (ED), Headquarters Investigation Unit, New Delhi, conducted the search operations on October 29 against Varanium Cloud Ltd, its promoter Harshavardhan Sabale and other associated entities.

It was alleged that Varanium Cloud raised about Rs 40 crore through their September 2022 IPO, claiming it would be used to set up edge data centres and digital learning centres in smaller towns.

The company projected itself as a fast-growing technology firm in the fields of digital media, blockchain, and EdTech, and even invoked the names of prominent business groups and media outlets to promote the IPO, thereby gaining public trust.

The latest search operation, conducted on October 29 at multiple locations in Mumbai, was carried out under the provisions of the Prevention of Money Laundering Act (PMLA), 2002.

The searches were undertaken based on credible information indicating large-scale manipulation of financial records, circular fund movements, and suspected laundering of Proceeds of Crime, said the ED statement.

However, the promised projects were never executed by Varanium Cloud Ltd, and the funds were diverted through false transactions and circular movements to inflate turnover and market value, said the agency.

Subsequent trading patterns revealed artificial price escalation followed by a heavy offloading of shares, consistent with a "pump and dump" scheme, where the company's stocks were deliberately inflated through misleading claims and later sold at high prices, deceiving the public and causing losses to genuine investors.

Preliminary analysis of the seized material reveals that a vast network of mule bank accounts, opened using forged KYC documents and dummy SIM cards, was being operated from Mumbai.

Over 400 cheque books linked to such mule bank accounts and more than 200 SIM cards, contained in more than 100 dual SIM mobile phones, mostly issued in the names of persons from Mumbai, were recovered during the search, the ED said.

These accounts were used for layering and routing funds through over 150 shell and dummy companies, concealing the origin of illicit money. Other electronic devices, such as laptops, hard drives containing incriminating evidence, have also been recovered from the search proceedings.

The findings expose a well-coordinated racket operating "Drawer companies" from a few small rooms, wherein fake identities, multiple mule bank accounts, and proxy communication channels were systematically used to dupe the public and launder their hard-earned money.

The ED has also identified several other connected persons and entities under scrutiny.

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