Web of fraudulent loan apps and the Chinese link

Incidents of mobile loan app frauds are now being frequently reported from our state too. Who is behind these frauds that trap the common folks? What is the Chinese link to it?

As instant online loans wrecked lives in Kerala too, Manorama carried out a fact-check on the fraudulent apps. The objective was to make a list of unauthorised apps and find out if there were any similarities between them. The enquiry was held with the help of Nandakishore Harikumar, CEO of Technisanct, a cybersecurity startup in Kochi.

The search that began from an app company, registered at the Okhla Industrial area in Delhi, led to a large online money-lending firm, Hui Yung Financial Holding Corporation, based out of Shanghai in China.

The parent companies of most of the applications, that were scrutinised, had at least one Chinese national in the director board. Also, the same directors for most companies. Indian heads in several of these firms were found to be just dummy directors. Most of these companies have been registered in the last two years.

Not just a fraud committed by certain individuals, but the enquiry took us to a parallel financial network, which is strategically controlled by large Chinese companies.

Chinese-made Indian company?

A check into the list of directors of FTek Consultancy services, the parent company of another app under scrutiny, led to a company, Benefactum Alliance (India). Abishek Kumar and Deepak Kumar Jha, and Chinese national Du Xuezhen are part of this company. The domain of the email given in the Registrar of Companies was found to be Chinese. In the next stage of the probe, it became clear that the email domain was linked to a Chinese firm, Hebron Technology.

The main investors in the Hebron Technology are the Hui Yung Financial Holdings in China. The list of subsidiary companies of Hui Yung was also checked and it was revealed that they had a company named Benefactum Alliance in Beijing. The ploy became quite clear after it was known that Du Xuezhen was the director of Jupiter Trading, another company under the Hui Yung Financial Holdings. In short, Benefactum Alliance (India) is the desi version of the Benefactum Alliance based in Beijing, which in turn comes under Hui Yung Financial Holdings. And this company is controlled by Xuezhen, a close acquaintance of the director of Hui Yung Company.

scam

Hui Yung Holdings, which is listed on the US Stock Exchange NASDAQ, had allegedly engaged in businesses with its own subsidiary companies to inflate share prices. And Xuezhen is the director of one of these subsidiary companies.

He had reportedly resigned from the Benefactum Alliance (India) in the December first week. It is also likely that he fled, fearing that he could be caught.

Director of 7 firms in a single day

The career graph of Deepak Kumar Jha, another director of the Benefactum Alliance, is strange. He is the director of 12 companies. Deepak became the director of seven firms, such as Credit Mama and Loan Mama, on June 27. He became the director of the other five companies in last September and December. It was also proved that all the 12 companies, in which Deepak was the director, operated in the online loan sector. Five apps linked to these firms were also found to be essentially the same. Even the review of the app users was found to be similar in all apps. The websites were also the same. In short, even if the user gets rid of one app and starts using another, the money would be flowing into the same pocket.

Who is Wang Meng?

A Chinese national, Wang Meng, became the additional director in a firm, Chadha Finance, in February 2019. Chadha Finance came into existence in Delhi in 1986. The probe then focussed on how a Chinese national became part of a medium-sized firm that was started much before the advent of the internet era in India.

Also, enquiries were made about Chadha as well. Online loan sites such as WiFiCash and Happy Money were found to be operating under Chadha, which has a Non-Banking Financial Company (NBFC) licence. Though their apps have been removed from Google Play Store, the websites are still active. Consumers allege that both these applications did not follow the norms despite being an NBFC.

Wang Meng is unlikely have approached this 34-year-old firm as a small-time investor. It is more likely that he would have acquired the majority shares or bought the firm to 'legalise' his unauthorised business. Further investigations revealed that such gangs are ready to buy off NBFC firms that are on the verge of shutting down. These NBFC licences are only to give more credibility among the consumers. Probably because of this, the RBI had issued guidelines for the NBFCs last June.

Several Indians, who are on the director board of companies with the Chinese link, had been previously owners of certain old NBFC firms.

One of the first results on Google, while doing a search for buying NBFCs, was that of a legal advising company in Noida. Abhishek Kumar, who is part of Benefactum director board, was found to be the director of this advising company as well.

More links

Wang Meng’s presence does not end with Chadha alone. Wang is also part of a company, Pan Yun Technologies Ltd. Those who were arrested for conducting online gambling games in Hyderabad last August were found to be part of Pan Yun Technologies Ltd. Hence, we are in the midst of a huge fraudulent network, comprising online gambling sites and online loan apps.

Eight companies, including Pan Yun, came under the police radar then. Neeraj Tuli, who was the director of some of the companies, was a small grocer in Delhi. Neeraj had told the police that a chartered accountant had made him sign several papers and he was not aware of anything.

Apart from Wang, another Chinese national Jiang Haijie is also part of Pan Yun. Nithin Kumar Pandey, who became a part of this company in last August, is the additional director of another online app company Panxing Money Loan. A Chinese national was also found to be part of Panxing Money Loan.

Further revelations were made while checking the list of former directors of the Pan Yun company. Rajni, a former director of Pan Yun, was one of the former directors of Benefactum Alliance (India) as well. And Abhishek Kumar, who was the former director of Pan Yun, is currently one of the three directors of Benefactum. All these appear to be interwoven as a spider's web.

Apps

"This is a ploy set up by the Chinese units for two years. The COVID-19 pandemic only aided this. As several people ran out of money during the pandemic and started taking loans, 6-7 companies were set up by the same person," Nandakishore Harikumar, who helped in the probe, said.

Instant debt too

Within hours of just submitting the ID card online, the loan will be ready without any hassle - this is the bait laid out by fraudulent apps. Those Keralites, who were lured in by this instant loan, incurred the liability of lakhs of rupees and suffered humiliation. People walk into this trap while assuming that the interest would not be much of an issue for such hassle-free loans.

All that the borrower has to do is to install the app. But the app would gain access to the contact lists of the borrowers while installing. This can be used to blackmail the borrowers.

If a loan of Rs 5,000 is sought, only Rs 3,800 would be credited to your bank account, while citing excuses such as the GST and processing charge, for a period of six days. However, the borrower needs to pay a high interest rate for Rs 5,000 itself. And after the six days, huge amounts of fine would be imposed as a late fee daily. However, remember that these charges or the interest rate are not legal.

As the repayment gets delayed, threatening messages would continue to be sent to your phone. Then humiliating messages would be sent to the phones of your acquaintances, alleging that you are a fraud. With no way to make a repayment, the lenders would themselves suggest another app - take another loan from that app to make the current repayment. Thus, the borrower will incur a debt of lakhs of rupees.

Lured in

A Thiruvananthapuram youth, Vineeth, had recently killed himself after falling into a debt trap by playing online rummy. People associated with the mobile loan apps had allegedly reached his house with threats, his brother Vineesh has revealed. His family got to know only much later that Vineeth had taken loan from such apps. Vineeth had a debt of Rs 21 lakh.

"Several people started asking me after seeing the messages sent by app companies. That's when I came to know that he had taken such loans," Vineesh explained.

Experts point out that the online loan app is a continuation of the Chinese ploy to lure lakhs of people to gambling.

Under the guise of shell companies registered in India, internet companies based out of Beijing amassed over Rs 1,200 crore in a short span of months. Currently, the Enforcement Directorate is investigating the issue.

The Chinese companies popularised gambling through new formats of colour prediction games in which the players placed bets on colours and numbers that appeared at the web platform during a specific time. And people who run out of money by playing these games frequently have no other way but to depend on loan apps.

Be alert

Not all online loans invite trouble. Loans offered by organisations that operate as per the government norms are secure. The Reserve Bank of India, in a circular issued in June, had stipulated that apps and portals that offer loans should disclose from which firm the loan was being availed. Complaints can be made if the interest-calculating methods are not in line with the norms.

Do not fall for threats such as the CIBIL (Credit Information Bureau India Limited) score will reduce. These loans are not linked to the CIBIL in no way. Do not give access to all the data on the phone while installing an app. Have a clear understanding about the money-lending firm. A Google search would reveal if complaints had been raised against the firm.

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