The Enforcement Directorate (ED) of India has taken significant action against the Highrich Group, freezing approximately ₹32 crore ($3.83 million) in cash deposits and other assets linked to the group amid investigations into an alleged crypto Ponzi scheme.

According to sources reported by The Hindu, the ED's probe revealed that K.D. Prathapan and Sreena Prathapan's Highrich Group accumulated around ₹1,500 crore ($179.53 million) from investors under false pretenses of high returns and a guaranteed 15% annual interest rate. The investigation alleges that the company's promoters engaged in illegal cryptocurrency trading across multiple exchanges and promoted their own cryptocurrency, HR Crypto Coin.

The ED asserts that these crypto assets were integral to a Ponzi scheme, where returns for existing investors were purportedly financed through new investor contributions. Moreover, the scheme allegedly enticed investors with promises of a 30% direct referral income for bringing in new participants.

Since January, the ED has reportedly frozen ₹260 crore ($31.12 million) in total, including ₹212 crore ($25.4 million) from 55 frozen bank accounts belonging to the company and its principals. Additionally, the investigation has identified ₹15 crore ($1.8 million) in immovable properties allegedly acquired from proceeds of crime by the promoters and other key figures.

Prompted by multiple complaints from the Kerala Police, the ED conducted raids on premises linked to HighRich Smartech Pvt. Ltd., HighRich Online Shoppe Pvt. Ltd., and associated entities, culminating in the substantial freezing and seizure of assets.

Ponzi schemes like the one allegedly orchestrated by the Highrich Group pose significant risks to global financial markets and investor confidence. Recent incidents involving crypto-related businesses underscore the urgent need for robust regulatory measures to detect, prevent, and mitigate the impact of fraudulent activities.

In June 2022, Celsius Network, a prominent crypto lending platform, halted transfers indefinitely and filed for Chapter 11 bankruptcy amid allegations of operating a Ponzi-like scheme. Similarly, FTX, once the second-largest crypto exchange, filed for bankruptcy in November 2022 after customer assets were reportedly misused in risky investments, leading to substantial financial losses.

The U.S. Securities and Exchange Commission (SEC) remains vigilant against Ponzi schemes, recognizing their potential to destabilize financial systems and harm investors. U.S. Senator Elizabeth Warren has been vocal about the need for stronger SEC oversight in the cryptocurrency sector to safeguard investors and ensure market integrity.

SEC Chair Gary Gensler advocates for integrating cryptocurrencies into existing financial regulatory frameworks to enhance transparency and mitigate risks associated with illicit activities such as sanctions evasion and terrorist financing. Treasury Deputy Secretary Wally Adeyemo and other officials echo similar concerns, highlighting the importance of stringent regulations to curb misuse of cryptocurrencies globally.