Paytm denies any role in Chinese loan app case

It is already well known that Paytm has not had a very flattering performance post listing, having lost nearly two-third of its value. Now, One97 Communications, the company that operates the Paytm brand, has come under fire for being involved with the Chinese loan app scam. However, Paytm has been categorical to deny any link with the merchants that are under the Enforcement Directorate investigation glare in the Chinese loan app case. Paytm has clarified that none of the funds frozen by ED belonged to Paytm or its group companies.

ED has already underlined that this was a routine investigation conducted by them with raids at the premises of suspects. The ED is focusing on a specific set of merchants, involved in the Chinese loan app scam, where Paytm is presumably a provider of payment services. As is well known, Paytm is not a provider of loans but it does facilitate loans on its platform. Paytm has clarified that many of these merchants under the ED scanner were independent entities and none of them were a part of the Paytm group.

This clarification came after the ED conducted raids at six premises of different online payment gateways including marquee names like Razorpay, Paytm and Cashfree in Bengaluru. The raids were over alleged irregularities in instant app-based loans, which were purportedly controlled by Chinese persons. As of the time of writing, the searches were still underway. There is some fire behind this entire smoke because the ED confirmed that it had seized Rs17 crore of funds in merchant IDs and bank accounts of Chinese controlled entities.

Paytm has also confirmed that as per the instructions of the ED, it has frozen certain amounts pertaining to selected Merchant IDs (MIDs) of a set of merchant entities. These are the ids that are identified by the ED as backed by Chinese funding sources. However, Paytm has once again been categorical that none of the funds, which have been instructed to be frozen by the ED, belongs to Paytm or any of its group companies. Paytm has also added that it may not have full control over the fund trails of all its merchant entities.

The ED has already initiated a probe under the Prevention of Money Laundering Act (PMLA). This was after several gullible borrowers who had taken money from such app based platforms even went to the extent of committing suicide because they were being coerced and harassed by these loan app companies/. The loan apps had even threatened to defame such borrowers by publicising their personal details available in their phones and other high-handed methods to threaten them. It was breach of privacy plus usurious rates of interest.

However, the reason the ED got involved was that the funding actually came from dummy Chinese accounts and in many cases the proceeds of crime were routed through payment gateways. The modus operandi, in many cases, was also that they used forged documents of Indians and made them dummy directors just to give the lending companies an Indian flavour, which were essentially Chinese and controlled by Chinese persons. As of now, Paytm is fully cooperating with the authorities and complying with ED directions.