Many stories of loan fraud through mobile apps are often heard in Kerala. Who is it that waits and traps ordinary people like a spider's web? And what is the Chinese connection to this scam? Manorama investigates…
The investigation journey in search of those behind the 'scamming apps' started in the wake of a series of stories about online loans destroying lives in Kerala also emerged. The aim was to make a list of apps running illegally and see if there were any similarities between them.
The investigation was carried out with the help of Nandakishore Harikumar, CEO of Technisanct, a cyber security startup based in Kochi.
The search began from the address of an app company registered in the Okhla Industrial Area in Delhi, and eventually led to the Hui Yung Financial Holding Corporation, a large online lender based in Shanghai, China.
The parent companies of most of the lending apps that were scrutinised had at least one Chinese national in the board of directors. Also, most companies had the same directors. Many of these companies have India directors, but they are just dummies! Most of these companies have been registered only in the last two years.
Beyond the fact that this was a scam perpetrated by a few individuals, what emerged from the investigation was the depths of a parallel economic setup that is systematically controlled by large Chinese companies.
China-made Indian company!
The investigation, which began with the list of directors of FTek Consultancy Services, the parent company of an app alleged to be involved in the loan scam, led to another company, Benefactum Alliance (India). Besides Abhishek Kumar and Deepak Kumar Jha, the company also lists Du Xuezgen, a Chinese national, as a member of the company.
When the domain name of the email address provided to the Registrar of Companies was checked, it turned out to be Chinese. Subsequent investigations revealed that the email domain was linked to a Chinese company called Hebron Technology. This is where the twist comes.
The main investor in Hebron Technology is Hui Yung Financial Holdings in China. We then checked the list of Hui Yung's subsidiaries and learnt that it owned a company named Benefactum Alliance based in Beijing.
A clear picture of the Chinese connection to the loan app scam in India emerged when we also learnt that Du Xuezgen was a director in Jupiter Trading, too, which is a company under Hui Young Financial Holdings.
In a nutshell, Benefactum Alliance (India), whose name had cropped up in the initial stages of our investigation, is the Indian entity of the Beijing-headquartered Benefactum, which is a subsidiary of Hui Yung Holdings. Xuezgen, the person who controls the company, is a close associate of the director of Hui Yung Holdings.
Hui Young Holdings, which is listed on the US stock exchange Nasdaq, has been accused of inflating stock prices by doing business with its own subsidiaries.
The nature of the loan scam becomes clear on learning that Xuezgen is the director of one of these subsidiaries. It is learnt that he resigned from Benefactum (India) in early December. It is possible that he left the country when he was certain that he would be caught for running the scam.
Laying the debt trap
The apps involved in the loan scam baited people by offering loans that involved hardly any complex paper work. All that is needed is to apply online by providing just an ID and the loan will be disbursed in hours.
Many Malayalees who were trapped by these apps incurred liabilities that ran into lakhs of rupees and also faced embarrassment. Many people become addicted to such apps because there is no complication in getting a loan and in the assumption that the interest rate doesn’t matter.
All that is needed to get a loan is to instal the company’s app. But as soon as the app is installed, it will collect all the phone numbers saved in your contact list. This is then used to blackmail later those who had taken loans.
If you seek a loan of Rs 5,000, you will be paid Rs 3,800 through your bank account for a period of six days, deducting the remaining amount in the name of GST, processing charges and other such heads. However, you will be charged an exorbitant interest on Rs 5,000. After six days, you will be charged a hefty fine every day in the name of late fee. But remember, these charges and interest are not legal.
If the repayment is delayed, a threatening message will be sent regularly to your phone. Then they will start sending defaming messages against you to the numbers of acquaintances saying that you are a fraud.
When the loan-taker feels trapped and finds no way of repaying, the app company will itself suggest another app, suggesting that the original loan amount be cleared by taking another loan from the new app.
We will give you money to play
Representatives of online loan apps had visited the home of Vineeth, of Kuttichal in Thiruvananthapuram, who committed suicided after falling into a huge debt by playing online rummy, and threatened the family, brother Vineesh said.
The family came to know pretty late that Vineeth, who was in debt of Rs 21 lakh at the time of his death, had borrowed money through such apps.
"After seeing the message sent by the app company, many people started asking me. That's how I came to know that Vineet has borrowed like this," says Vineesh.
"Many people started questioning me after reading the message sent by the app company, That's how we came to know that Vineeth had borrowed like this," says Vineesh.
Experts point out that online loan apps are a continuation of the Chinese conspiracy to lure millions into gambling under the guise of work-from-home offers.
Under the cover of companies that are only on paper and are registered in India, Beijing-based Internet companies have earned more than Rs 1,200 crore in just a few months. An investigation by the Enforcement Directorate is currently in progress in the case.
Chinese companies have introduced gambling in a new form through the colour-number prediction games that involve predicting and betting on the colour and number that would appear on a web platform at specific times.
Loan apps are the only way out for those who run out of money by playing such games!
Not all online loans are fraudulent. Loans from institutions that comply with government regulations are safe.
In a circular issued in June, the Reserve Bank of India (RBI) had asked the lending apps and portals to disclose the source of the funds they disburse as loans.
You can lodge a complaint if the methods of calculating interest are against the norms. Do not fall prey to the threat that your CIBIL (Credit Information Bureau India Limited) score would drop if you do not pay the interest rate. Such loans have nothing to do with CIBIL. Do not give access to all the information in your phone while installing such apps.
Get a good understanding of the institution offering the loan. Do a Google search to see if there are any complaints against them.
Wang Meng and Rajini
Wang Meng, a Chinese national, was associated with Delhi-based Chadha Finance. He was also a part of Panyun Technologies Limited.
Here's another twist. Those arrested in Hyderabad last August for conducting online gambling games were part of Panyun Technologies. This, in effect, means there is a vast network of online gambling sites and online loan apps out to lure people, make them fall in a debt trap and then fleece money through illegal means.
Eight companies, including Panyun, came under the police radar that day. Neeraj Tuli, listed as a director in some of these companies, was a small grocery dealer in Delhi. Neeraj told the police then that his chartered accountant had asked him to sign on several papers and that he was not aware of the fraud.
Besides Wang, Panyun has another Chinese national, Jiang Haijie. Nitin Kumar Pandey, who became a part of the company only last August, is also the additional director of another online app company, Panxing Moneyloan.
Panxing also has a Chinese citizen
A look at the list of the former directors of the Panyun company revealed a shocking detail. Rajini, a former director of Panyun, is also one of the former directors of Benefactum Alliance (India) mentioned above.
Abhishek Kumar, the former director of Panyun, is now one of the three directors of Benefactum! Everything is intertwined like a spider's web.
"This is a strategy that Chinese centres have been working on for two years. COVID just offered an opportunity for its faster rollout. Amid COVID, many people without cash started taking loans, giving rise to a situation where one person could start 6-7 companies to make a quick buck," says Nandakishore Harikumar, who assisted in the investigation.