Enforcement Directorate unearths money laundering racket using IPO funds in Mumbai

Mumbai: The Enforcement Directorate (ED) on Tuesday said it has uncovered a Rs 40-crore money laundering network that allegedly duped investors through a 2022 IPO and large-scale share manipulation.

Searches conducted on October 29 in Mumbai led to the seizure of 400 cheque books linked to “mule” bank accounts and over 200 SIM cards, as part of an ongoing probe under the money laundering act (PMLA).

The investigation focuses on Varanium Cloud Ltd, its promoter Harshavardhan Sabale, and several associated entities. According to the ED, the company raised around Rs 40 crore via its September 2022 IPO, claiming the funds would be used to set up edge data centres and digital learning hubs in smaller towns.

Varanium Cloud projected itself as a fast-growing technology company in the digital media, blockchain, and EdTech sectors. The agency said it invoked the names of reputed business groups and media outlets to build credibility and attract investors.

However, the ED alleged that the promised projects were never executed. Instead, the company diverted the funds through fake transactions and circular movements to inflate its turnover and market value. Trading data later showed “artificial” price hikes followed by massive offloading of shares—typical of a “pump and dump” scheme, where stock prices are artificially inflated before being sold at high valuations to unsuspecting investors.

Preliminary analysis of the seized material revealed a vast network of mule accounts opened using forged KYC documents and dummy SIM cards. The agency said these accounts were used for “layering” and “routing” funds through more than 150 shell and dummy companies to disguise the origin of illicit money. The ED described the operation as a “well-coordinated racket” running “drawer companies” from small rooms using fake identities, multiple mule bank accounts, and proxy communication channels to deceive investors and launder their money.