HPZ Token Scam: PMLA Appellate Tribunal Upholds ED's ₹33.73 Crore Attachment Against Fonepaisa

The Appellate Tribunal under SAFEMA has dismissed Fonepaisa Payment Solutions Pvt Ltd's appeal and upheld the Enforcement Directorate's attachment of ₹33.73 crore under the Prevention of Money Laundering Act (PMLA) in connection with the HPZ Token scam.

The case concerned funds allegedly linked to payment transactions for illegal betting and gaming platforms connected with the larger HPZ Token cheating conspiracy.

Justice Munishwar Nath Bhandari observed that Fonepaisa had failed to disclose the source of the attached funds, merely claiming that ₹33.14 crore held with PayU represented pooled legitimate business funds, without explaining the amounts in its Axis Bank accounts.

"I have considered the rival submissions and find that the Appellant has not disclosed the sources of income of the amounts under attachment and has vaguely stated that the amount of Rs. 33,14,50,433/- in the account maintained with M/s PayU Payments Pvt. Ltd. is the pooled funds of various legitimate business. Even otherwise, no disclosure of income has been made qua the amounts outstanding in accounts maintained with Axis Bank. In view of the above, I am unable to accept even the last argument raised by the Ld. Counsel for the Appellant.", the appellate tribunal said.

The case arose from complaints by investors allegedly cheated through the HPZ Token application, which promised substantial returns from investments in bitcoin mining machines. FIRs were registered in Nagaland and Assam in September and October 2021, followed by a CBI FIR in June 2022.

The ED alleged that Fonepaisa facilitated payments for illegal betting websites through PayU Payments. It provisionally attached ₹33.73 crore held in Fonepaisa's PayU virtual nodal account and two Axis Bank accounts.

The Tribunal observed that the FIRs were not required to contain an exhaustive account of every criminal activity.

It therefore held that the proceeds of crime arose from various activities relating to the scheduled offences of cheating and conspiracy, and not merely from gaming, betting or bitcoin transactions.

"The aforesaid argument is unacceptable in light of the fact that the proceeds of crime in the present case were generated from various criminal activities relating to scheduled offences of cheating and conspiracy and not merely gaming, betting and bitcoin. Even otherwise, it is a settled position of law that FIR is not an encyclopedia of allegations of commission of offence, therefore, sole reliance on FIRs in the scheduled offences cases to contend non-involvement of the Appellant in the criminal activities is untenable and especially in view of the subsequent investigation in the offence of money-laundering."

It further rejected Fonepaisa's argument that the ED had improved its case through the supplementary prosecution complaint. The Tribunal noted that the documents accompanying the complaint were the same materials relied upon for passing and confirming the provisional attachment order.

The Tribunal also observed that Fonepaisa had failed to disclose the sources of the attached funds. It had merely claimed that ₹33.14 crore withheld by PayU represented pooled funds from legitimate businesses, without providing supporting details.

No income particulars were disclosed for the amounts lying in its Axis Bank accounts either.

The Tribunal therefore rejected this contention and found no reason to interfere with the attachment order.

For the Appellant: Advocates Debesh Panda, Piyush Pandit

For the Respondent: Advocates Mayank Bawa, Saubhagya Sharma, Prabhat Sharma