Compulsive Ponzi player? Highrich promoter floated fresh entity two months after ED raid

Kochi: Promoter of the scam-hit Highrich Online Shoppe Private Limited Kolatt Dasan Prathapan (43) is turning out to be a compulsive Ponzi player.

According to the remand report filed by the Directorate of Enforcement (ED) before a special court in Kochi on Friday, July 5, Prathapan started another entity named HR Innovation in the name of one Fijish and started collecting deposits from people by promising them high returns.

The company registered in Jharkhand in April 2024 -- two months after ED froze the bank accounts of Highrich Online Shoppe -- collected Rs 68.33 lakh in 24 days, according to the remand report.

The bank account of HR (abbreviation for Highrich) Innovation was opened with Indian Overseas Bank outside Kerala so as not to divulge the details to investigating agencies, it said. But the money was collected in the same Ponzi scheme as in the Highrich Online Shoppe, ED told the special court.

The Special Court judge N Seshadrinadhan remanded Prathapan to 14 days judicial custody, that is till July 19, said ED's special public prosecutor M J Santhosh. ED  arrested Prathapan under Sections 3 and 4 of the Prevention of Money-Laundering Act after a day-long questioning session on the night of June 4.

Adv Santhosh told the court that Prathapan, before starting Highrich Online Shoppe with his wife Kattukaren Sreedharan Sreena alias Sreena Prathapan (35), was running a Ponzi scheme under the name of Greenco Securities Private Ltd in Thrissur in 2010. He was arrested and convicted in that case in 2011.

Just like Highrich, Greenco was also a money chain company taking deposits from people by promising exorbitant returns and using part of the money to pay the earlier depositors, in other words, a Ponzi scheme.

The court of Additional Chief Judicial Magistrate had found Greenco's promoters Prathapan, Kattukkaran R Sivadasan and KV Biju Sagar guilty of cheating, breach of trust, and also under the Prize Chits and Money Circulation Schemes (Banning) Act. They were sentenced to prison and fined Rs 98.55 lakh each. Their prison sentences were later suspended but the High Court of Kerala asked them to pay the fine in April 2018.

In October 2019, one year and a half after the setback from the High Court, Prathapan and his wife Sreena set up Highrich Online Shopee Pvt Ltd.

How Highrich raised money
ED told the court that Highrich Online Shoppe ran an online grocery delivery business that promised a discount of up to 30 per cent to its members. But the main income came from the Ponzi scheme where each member is expected to bring in two new members by taking a membership fee of Rs 800. The parent member would get Rs 100 each as an assured commission (12.5 per cent) for 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. "In the 10th round, the company sells the dream of adding 1,024 persons, and the original member gets Rs 1,02,400 by depositing just Rs 800," the report said.

The problem with the geometric progression of the scheme is the number of members would cross India's population in 30 rounds, ED said. Pyramid schemes are designed to go bust and at any point and when it goes bust, 88 per cent of members will lose their money.

ED said it analysed the cloud server data of Highrich Online Shoppe with the help of service provider Gipra Solutions Private Ltd and found that the company received Rs 1,673.10 crore from the public through 13 accounts with various banks. Of that, it disbursed Rs 1,422.16 crore. The remaining Rs 250 crore is retained with the company.

To date, ED has frozen bank accounts and attached properties amounting to Rs 260 crore. The agency has also identified five top 'leaders' of Highrich who have received crores of rupees making next to nil investment.

The central agency said Riyas Vellachithodukayil who runs Softplus Technology in Kozhikode's Koduvally got Rs 18.26 crore; Rahul Gendraj Nerkar of Nagpur got Rs 10.07 crore; Rajkumar Manhar of Ashta Marketing in Raipur got Rs 7.96 crore; Dinuraj KR of Tanz Associates in Thrissur got Rs 5.97 crore; and Suresh Babu T of Kannur got Rs 5.36 crore. ED conducted searches of their offices and houses in June.

New complaints keep flooding police stations
On April 20, 2024, the Kerala government handed over the Highrich case to the CBI. But as recently as July 4, Kannur's Thalassery police registered an FIR in which a 49-year-old woman from Eranholi lost Rs 22.10 lakh. Highrich promoters Prathapan and Sreena had promised her returns of 10 times her deposits.

On June 29, 2024, Edakkad Police Station, also in Kannur district, booked the promoter couple based on a complaint filed by a father-daughter duo from Muzhapilangad.

Between October 2020 and October 2023, the 71-year-old man and his daughter invested Rs 29 lakh to buy Highrich's digital ID, and in Highrich OTT. They got back Rs 10.48 lakh but Prathapan and Sreena still owe them Rs 18.52 lakh, discounting the promised high returns.

ED said Sreena and Prathapan told the couple that their OTT platform had 10 lakh viewers, and the cinema of the complainant could be released through Highrich OTT and offered them a 50 per cent profit from the viewership.

On May 13, 2024, Palakkad's Nattukkal police also booked the Highrich couple and two of their partners from Kasaragod district -- Muhammed Sali (Panayal) and Munavar (Neerchal) -- based on a complaint filed by a 19-year-old from Palode.

The young man said he was promised Rs 110 every week till his investment of Rs 10,000 trebled. In five tranches between July 2022 and November 2023, he deposited Rs 1.80 lakh in Highrich. He got back only Rs 60,000.

On April 27, 2024, Kasaragod's Chandera police registered an FIR against the Highrich promoter couple based on a complaint filed by a 32-year-old woman from Trikaripur. She said she deposited Rs 4.61 lakh in Highrich after being promised high returns. She lost all her money.

Seeking Prathapan's judicial remand, ED on July 5 told the Special Court that police in Kerala were not registering all the complaints flooding the stations.

ED yet to crack Highrich's crypto scam
ED said the woman from Trikaripur who lost Rs 4.61 lakh was duped using Highrich's cryptocurrency, HRC. It is run by a company named Highrich Smart Tech Private Ltd. The customer was promised 15 per cent interest and 500 per cent annual profit on their deposits, and a 30 per cent referral income when they introduced a new customer.

Prathapan ventured into the cryptocurrency business by creating 10 crore 'HRCC' tokens on the BB blockchain for Rs 2.5 lakh. He priced each HRCC token at $2 Tether (approximately Rs 160). He sold his HRCC coins to Highrich members in exchange for USDT or other popular cryptocurrencies and moved the digital money to his personal wallets.

ED told the court that Prathapan was not sharing the transaction details of his personal crypto wallets, saying he forgot the passwords. "He is not cooperating with the department to identify where the proceeds of the crime are parked," ED told the court in its remand report.

ED sought the judicial custody of Prathapan to recover the proceeds of the crime and know about the business entities floated by him in his name, in the names of his relatives, and other individuals.