Kochi: Thrissur-based Highrich Online Shoppe Pvt Limited illegally raised Rs 1,157 crore from the public as membership fees for its pyramid scheme run under the guise of an online grocery business, said the Directorate of Enforcement (ED).
The central agency provisionally pegged the size of the fraud in its order to freeze 55 bank accounts with Rs 212.46 crore belonging to the company, its associated companies, and their promoter couple K D Prathapan and Sreena Prathapan.
Of the Rs 1,157.32 crore alleged illegal income, Highrich placed 98% or Rs 1,138.11 crore under the head of the company's own cryptocurrency HRCC, ED said in the order. The remaining Rs 19.21 crore was placed under the head of 'grocery pin', ED said.
The company, however, recorded the deposits as 'purchase consignment advance' in the books of accounts for FY2023-2024, it said.
On January 23 and 24, a team of officers led by S G Kavitkar, Assistant Director of ED's Kochi Zonal Office, searched the offices of Highrich Online Shoppe and Highrich Smartech Pvt Limited at Neruvissery in Thrissur's Arattupuzha.
During the course of the search, ED officials confronted the Chief Operating Officer and the Marketing Manager of Highrich Smartech, Highrich Shoppe, and associated companies regarding the alleged irregularities, the freeze order said. "No satisfactory explanation could be produced by them during the examination," it said.
Power of duplication & deceit
Highrich Online Shoppe has a grocery delivery business that promised a discount of up to 30% to its members, but the main income came from the Ponzi scheme, where it took Rs 800 from new members and paid an assured 12.5% commission to earlier members.
In the pyramid scheme, a Highrich Online Shoppe member is expected to bring in two new members for a fee of Rs 800 each. He will get Rs 100 each from the two new members, that is Rs 200 from Rs 1,600; in the next round, the two members would bring in four members and the original member would get Rs 400 from the Rs 3,200 raised.
Highrich has put out several such messages in Hindi on its Facebook page.
In the 10th round, the company sells the dream of adding 1,024 persons, and the original member gets Rs 1,02,400. In all, there would be 2,046 members after 10 rounds, and the original member would get Rs 2,04,800 by investing just Rs 800, Highrich said.
The problem with geometric progress is the number of members would cross India's population in 30 rounds. "Pyramid schemes are designed to go bust and at any point when it goes bust, 88% will lose their money," said P P Sadananand, an expert in financial fraud and Superintendent of Police, Crime Branch, Kannur.
ED said the money collected by Highrich was "majorly used for redistribution to members as incentive/ commission in typical Ponzi scheme format", it said.
The rest of the money, ED said, is the proceeds of crime it found in 55 accounts in four private banks -- HDFC Bank, ICICI Bank, IndusInd, IDFC First Bank. The money totalled to Rs 212.46 crore.
Of that, Rs 135.59 crore or 64% was in 19 fixed deposit accounts at ICICI Bank and HDFC Bank which give an annual return of only around 7%.
Ironically, Highrich which promised Rs 2,04,800 from an investment of Rs 800 in 10 months chose to park its money in a traditional financial instrument such as a fixed deposit.
Crypto scam
Sreena Prathapan and Prathapan K D, the Chief Executive and the Managing Director of Highrich companies, started Highrich Online Shoppe that has two "income plans" -- a grocery delivery business that promises a discount of up to 30% to its member customers, and another in the multi-level marketing scheme, which the ED said was a ponzi scheme.
Highrich Smartech Private Limited has two verticals -- HR Cryptocurrency and streaming platform HR OTT.
According to reports, the Prathapans bought the OTT platform from Vijesh Pillai, who hit the headlines in March 2023 when gold smuggling accused Swapna Suresh named him as an emissary of CPM state secretary M V Govindan. She alleged that he, on behalf of Govindan, offered her Rs 30 crore to desist from naming CPM leaders in the gold smuggling case. Govindan and Gijesh Pillai are from the same village in Kannur.
ED is investigating Pillai's financial transactions in that case. However, ED did not mention HR OTT in its freeze order.
It, however, delved a bit into Highrich Smartech's other business, HR Cryptocurrency in the order. ED said Highrich Smartech was started by Prathapan and Sreena Prathapan to engage in international trade using a crypto coin, HRCC.
A customer investing in HR cryptocurrency is given a token that can be traded in an exchange. "To date, no exchange is formed," it said.
According to various websites listing details on cryptocurrencies, Highrich launched 10 crore crypto tokens or coins in December 2022. Today, several exchanges value it differently. Coinmarket values HRCC at $1.76 but pegs market cap at zero.
GeckoTerminal pegs the value of HRCC at $0.07051 and Bankcex values HRCC at $0.06.
GeckoTerminal pegs the market cap of HRCC at a whopping $253.49 million (Rs 2,107 crore) but the liquidity, or total value of asset available for trading at $919.22 (Rs 76,407).
BscScan, owned by Etherscan, says 1,374 persons hold all the 10 crore Highrich coins but pegs the market cap at zero. Crypto traders said the market cap can crash to zero if there are no coins to trade or there is no trading.
According to Highrich's Facebook page, it has two plans to accept investment in HRCC -- Rs 1,600 and Rs 20,000.
Crypto players said such plans are launched to segregate poor and rich investors and target the rich.
Highrich has listed HRCC not in tier 1 exchanges such as Binance, or tier 2, 3, 4, or 5 exchanges. "It has listed HRCC on Neonex where the fee is low and rules can be lax," said a veteran crypto trader. Another trader said the whitepaper of HRCC was full of empty words and jargons and examples of Bitcoin aimed at wowing a first-time investor.
ED's freeze report said that during FY 2022-2023, Highrich Smartech collected an advance amount of Rs 20 crore from customers and in FY 2023-2024, an amount of Rs 8.11 lakh was collected "with an intention to make unjust profit by convincing the customers that if they invest in their HR Crypto Currency, they will get 15% interest and 500% annual profit. When a customer introduces a new customer, they will get 30% direct referral income".
Highrich was on an overdrive attracting investment from North India. Most of its posts on Facebook were in Hindi. One post it kept repeating read: "If you want Rs 5000/ Rs 10,000 in your account before waking up every morning then join Highrich Online Shoppe immediately," it read.
"This concept is from Kerala. You have heard of Kerala? The laws and education are strict (sic). There cannot be anything illegal if a plan is run from there," it said.
"This plan is not MLM (multi-level marketing) because you don't sell anything." Law enforcement agencies will love the post because that is the definition of a pyramid scheme.
