Crypto's Double-Edged Sword: CBI Unveils HPZ Scam in Major Crackdown

The Central Bureau of Investigation (CBI) has arrested five individuals in connection with a large-scale cryptocurrency token fraud involving the HPZ Token scheme, as part of its ongoing Operation Chakra-V against cyber-enabled financial crimes. The operation, conducted across Delhi NCR, Hyderabad, and Bengaluru, targeted a sophisticated transnational fraud network that defrauded victims through fake loan, job, investment, and cryptocurrency schemes between 2021 and 2023 . The CBI recovered incriminating digital evidence and financial records from seven locations, highlighting the use of shell companies, mule bank accounts, and cross-border cryptocurrency transfers to launder funds .

The HPZ Token scam operated by luring investors with promises of high returns from cryptocurrency mining and online gaming platforms. Fraudsters initially paid small returns to build trust before abruptly shutting down the app and websites, leaving victims financially exploited. Investigators found that the scheme involved converting illicitly collected funds into cryptocurrencies, which were then transferred through multiple wallets and remitted abroad to obscure the trail . The CBI stated that foreign-based masterminds collaborated with Indian nationals to orchestrate the fraud, leveraging shell entities incorporated in India to facilitate the illegal collection of public funds via fintech and payment aggregator platforms .

The scale of the fraud is estimated to involve hundreds of crores of rupees, with the Enforcement Directorate (ED) having previously frozen assets worth ₹603.4 crore in related investigations. The CBI's probe revealed that the fraudsters used complex financial layering techniques to move funds, including creating dummy directors for shell companies and rotating bank accounts to avoid detection . The agency emphasized that the case underscores the growing sophistication of cybercriminals in exploiting cryptocurrency's anonymity for financial crimes.

Operation Chakra-V, launched to combat cyber-enabled fraud, has intensified scrutiny of cross-border financial trails and illegal crypto exchanges. The CBI highlighted that the arrests are part of a broader effort to dismantle transnational fraud networks, with further investigations underway to identify additional conspirators and recover stolen funds . The agency also noted the importance of inter-agency coordination and advanced digital forensics in tracing the intricate financial schemes employed by the perpetrators.

The HPZ Token case has drawn attention to the risks associated with unregulated cryptocurrency projects in India, where the sector has seen rapid growth but also increased regulatory scrutiny. The CBI's actions reflect a government-wide push to strengthen oversight of digital assets, following high-profile scams that have eroded investor confidence. Experts caution that such frauds often rely on social media and online advertising to target unsuspecting victims, emphasizing the need for public awareness and stricter compliance measures for fintech platforms .

The arrests and ongoing investigation signal a critical step in India's efforts to combat financial crimes in the crypto space. As the CBI continues to trace cross-border transactions and identify foreign collaborators, the case highlights the challenges of regulating decentralized digital assets. For investors, the incident serves as a reminder to exercise caution with high-return schemes and verify the legitimacy of crypto projects before committing funds .