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In what could be long and arduous chase, the Directorate of Enforcement (ED) has moved a letter rogatory (LR) to seek Spain's support in investigating Octafx , the forex trading app found to have used some Sebi-regulated alternative investment funds to launder money, people in the know told ET. The shadowy betting empire is owned by a Russian (one Pavel Prozorov), and its maze of operations has stunned Indian authorities. Octafx has its servers in Barcelona, tech support team in Georgia, the parent head office in Cyprus, banking links in Singapore, and marketing outfits in Estonia and the British Virgin Islands, according to information gathered by the central agency.
Octafx raked in profits of about Rs 800 crore from India in just nine months in 2022-23, the people cited said. The LR, initiated in August, is a letter of request backed by a local court, for the assistance of Spanish authorities to obtain key evidence stored in Octafx servers. Issued under section 57 of PMLA to establish the money trail, the LR is a precursor to the filing of the prosecution complaint before PMLA Special Court, expected on October 4.
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Opposite trades According to ED’s findings, once a trader placed a `buy’ order, the broker countered it with a ‘sell’ order, causing the particular exchange rate to fall. This forced traders to close the position to avoid further losses and enabled the broker to book a profit. Thanks to absurdly high leverage of 1:100 or even 1:500 offered on the Octafx app --- indicating the ratio of the margin money chipped in by traders and the extent of borrowed funds --- panicked traders exited when the rates moved against them.
ED suspects that clients’ funds were not credited to trading accounts in the international market. “These offshore platforms,” said Jay Sayta, a technology and gaming lawyer, “do not comply with any laws of India and are said to have indulged in several dishonest and unethical practices including illegal transfer of funds received from the users on these platforms to the schemes’ ultimate beneficiaries and kingpins who are located abroad. The modus operandi in collecting funds from the public through mule accounts and remitting profits abroad through hawala, cryptocurrencies or fake import invoices is not very dissimilar to illegal offshore betting platforms.
” Indeed, money collected was allegedly transferred to Singapore as payment against “fake import of services”. “However, as we have seen in other cases as well, making the kingpins face the consequences of the laws of the land in India and getting evidence about such crimes from foreign authorities and/or courts is an extremely lengthy, complicated and time-consuming process. It will require persistent efforts on part of the authorities to ensure that the key people are brought to book and the case is not closed with action against low-level operatives,” said Sayta.
From generous promotional expenses to collecting and remitting funds --- a slice of which (over ₹17 crore) came back as foreign direct investment in the local entity Octafx India --- the group took various measures to cover its tracks. According to ED, Octafx hired retired bankers to train staff to handle queries from law enforcement agencies and traders, ran the Indian operations from Dubai, engaged Indians abroad to build trust, incentivised traders with gifts and encouraged them to act as “introducing brokers”. Also, it frequently changed local bank accounts and as more traders were allured to the platform, it increased the minimum cash deposit amount.
Octafx did not respond to ET's email queries till time of going to press. Founded in 2011, Octafx offered trading in commodities and cryptos besides forex. In India, it had its first brush with the law in December 2021 when an FIR was registered by Pune police.
A charge-sheet was filed in March 2022 for violation of the Indian Penal Code following which a case was recorded in December 2022 under PMLA. After ED conducted a search, Octafx India changed its name to Tauga Private Limited. (You can now subscribe to our Economic Times WhatsApp channel ).
