Kochi: "The entire focus of the company is about propagating 'how members can become rich by becoming members'. There is no focus on selling products."
That was the Directorate of Enforcement's assessment of Highrich Online Shoppe Private Limited in its affidavit submitted on Tuesday to oppose the anticipatory bail plea of couple promoters K D Prathapan and Sreena Prathapan.
Highrich, an online grocery, is facing investigation by multiple law enforcement agencies, from Kerala Police and Kerala's GST Intelligence Wing to ED.
All the agencies accuse Highrich's promoters K D Prathapan and his wife Sreena Prathapan of running pyramid schemes, taking deposits from new members and paying earlier members, and pocketing the rest as "proceeds of crime".
In a written reply to Ernakulam MLA T J Vinod in the Assembly, Chief Minister Pinarayi Vijayan said an investigation by Kerala Police found that Highrich has received Rs 3,141,33,91,800 (Rs 3,141.34 crore) as investments from people in Kerala and other states.
This is the highest amount Highrich is accused of illegally raising from the public by any agency.
Cherpu Police under the Thrissur Rural Police registered a case under the Prize Chits & Money Circulation Schemes (Banning) Act and are investigating the case, the Chief Minister said.
Police have found inter-state financial transactions but they have not yet found evidence on international transactions or investments, Pinarayi Vijayan said in the written reply to the Congress MLA's questions on Monday, January 29. The Chief Minister, however, said no decision has been taken on handing over the case to the Central Bureau of Investigation, as provided in Section 30 of the Banning of Unregulated Deposit Schemes (BUDS) Act.
Bail plea adjourned to Feb 2
Meanwhile, ED on Tuesday, January 30, submitted its counter affidavit to oppose the anticipatory bail plea of the Prathapans before the Special Court hearing money laundering cases in Ernakulam.
"Their counsel sought adjournment of the hearing to February 2 because they wanted to read our counter-statement," said ED's Special Public Prosecutor M J Santhosh. The court granted it.
Highrich, the brainchild of a four-time convict
ED told the court that Prathapan was a habitual offender convicted thrice and so did not deserve the concession of pre-arrest bail.
In 2010, Kolatt Dasan Prathapan alias K D Prathapan, Kattukkaran R Sivadasan, and K V Biju Sagar started Greenco Securities Private Limited in Thrissur. It was a money chain company that took money from new depositors and paid the earlier depositors. The promoters pocketed the rest.
In 2011, a year after Greenco was started, Thrissur Town East police station booked the three for criminal breach of trust (Section 406 of IPC), cheating people whose interest they were bound to protect (Section 418 of IPC), cheating (Section 420 of IPC) and under the Prize Chits and Money Circulation Schemes (Banning) Act. Prathapan was arrested and remanded in judicial custody.
The court of Additional Chief Judicial Magistrate found Prathapan, Kattukkaran R Sivadasan, and K V Biju Sagar guilty as charged and sentenced them to prison and fined Rs 98.55 lakh each. When they appealed, the Sessions judge suspended the prison sentence on the condition that they pay the fine of Rs 91 lakh each.
In April 2018, the High Court of Kerala rejected their appeal and asked them to pay the fine.
ED's counter-affidavit filed in the Special Court on Tuesday, January 30, said 15 FIRs were registered against Prathapan by three police stations in the Greenco case, and the courts convicted him in three. The rest of the cases are pending trial in courts. Greenco has been struck off from the Registrar of Companies (RoC).
In October 2019, more than a year after the setback from the High Court, Prathapan and his wife Kattukaren Sreedharan Sreena alias Sreena Prathapan set up Highrich Online Shopee Pvt Limited. It would also go the Greenco way.
GST says Rs 703.10 crore raised from public
In November 2023, the Intelligence Wing of the Kerala State GST arrested Prathapan and accused Highrich of evading taxes to the tune of Rs 126.55 core.
The Intelligence Wing said Highrich opened 630 franchises across India and launched the First Purchase scheme, Digital Coupon Scheme, and Privileged ID Schemes and raised Rs 703.10 crore from the public.
People could become members of Highrich Online Shopee and own a digital ID (with username and password) by depositing a fixed amount in Highrich Online Shopee. The company encouraged members to buy more IDs and bring in new members to form a pyramid of depositors. It promised them 'referral income', 'pair matching income', Sunday pool income', and life-long royalty.
The GST Intelligence Wing said the company did not declare the money raised from the public in the GST returns and so it evaded the tax payment of Rs 126.56 crore, one of the highest alleged tax evasions in the state.
Rs 1693.83 crore raised, say tech company
But Gipra Business Solution Pvt Limited, a firm that provided network maintenance services to Highrich, reportedly told the GST Intelligence Wing that the company "concealed a taxable turnover of Rs 1693.83 crore". It is more than the amount declared voluntarily by Highrich before the investigating officer.
Rs. 1,157 crore says ED
ED, which investigates money laundering cases, told the court the company illegally raised Rs 1,157.32 crore from the public as a membership fee.
It arrived at the number after searching the offices of Highrich Online Shoppe and Highrich Smartech and confronting the companies' Chief Operating Officer and Marketing Manager on January 24 and 25.
ED also froze 55 bank accounts of the companies and their promoters that had Rs 212.46 crore in the savings accounts and fixed deposits.
ED also said that the company raised "huge money" from the public under the guise of investing in the online streaming platform HR OTT. It was also another money chain.
Investigating agencies found that Highrich Smartech, which owns HR OTT, also launched a cryptocurrency called HRCC.
But it was also another pyramid scheme. According to a complaint filed with Sulthan Bathery police station, the company assigned $2 to one HRCC and accepted deposits under two schemes: a basic plan of 10 HRCC for Rs 1,600 ($20) and a Premium Plan of 125 HRCC for Rs 20,000 ($250).
The catch is the 'HRCC' has a lock-in period of one year during which time a client cannot exchange or sell the coin but depositors would be given up to 50% commission for bringing in new depositors. The lock-in period was because HRCC was not available on any exchange, said ED in its report submitted to the court.
Though the chief minister said that the police did not find any evidence of international investment or transactions, in an online meeting with members in November 2022, Prathapan said that Highrich cryptocurrency could accept investment from global clients.
"We have received around 500 entries from the citizens of Nepal," he said.
Prathapan said Highrich has 75 lakh members across the world. "If they all start using our cryptocurrency, it will become the world's no. 1 cryptocurrency," he said.
In three months, HRCC would be the number no. 1 coin on Binance, the world's largest crypto exchange, he said in November 2022. HRCC was never listed on Binance.
Apart from Sulthan Bathery police station, Cherpu police station and Ernakulam Town South Police Station have also registered FIRs against Highrich Promoters.
ED's public prosecutor Santhosh said Highrich is undoubtedly one ofthe largest financial frauds seen in Kerala. "Only an in-depth investigation would reveal the extent of the fraud," he said.