We, too, are victims here, claimed BricSpace, the Bengaluru-based co-working space that is under the Enforcement Directorate (ED) scanner over at least three fraudulent companies that floated loan-lending applications masterminded by Chinese nationals that trapped scores of Indians registered on their address.
The three companies under the ED scanner — Yellow Tune technologies, Mudmate technologies and Finroot Fintech Pvt Ltd — used the Bengaluru-based co-working space as their registry address, but their lease had expired in 01-03-2021, News18 has learnt.
Speaking to News18, an official from BricSpace claimed the government should put in place a thorough physical verification and vetting process. Companies approach co-working spaces with registered government documents such as PAN and Aadhaar cards and GST number. “As a business which rents out spaces to companies, we have to collect the documents and draw up an agreement. How can we verify a PAN or Aadhaar card,” asked a BricSpace official.
As an impact of News18 investigative series on the Chinese loan app scam, involving as many as 1,000 illegal companies operating in India and trapping scores, the government began conducting massive raids and searches in Bengaluru, Hyderabad and Gurugram. The News18 series highlighted how these companies were registered illegally under one address and their company representative was never found on the office premises.
PART 2 | Illegal Lending Apps Rely on Tangle of Shell Companies, Cryptocurrency to Lie Low
35 COMPANIES MISUSING ADDRESS?
The co-working space provider said the companies continued to use their address fraudulently, even though their lease had expired and that is why it was now being linked to them.
“We updated several agencies to show how companies have been misusing our addresses, but we can vet our clients only to a certain extent. Once your company has been registered to a certain address, invariably, all agencies land up at the same address if they are involved in any criminal activity,” the official added.
They have also written to the Ministry of Corporate Affairs requesting the removal of company addresses registered at their location, alleging that “unscrupulous entities have misused” the co-working space.
Another reliable company official claimed they have conducted an internal investigation and found 35 more companies misusing the address. The co-working space provider clarified that they do not know if they were involved in illegal activities, but notified to the Ministry of Corporate affairs and investigating agencies that those companies had been “illegally” using their address even after their agreement has expired. This list of these companies is in possession of News18.com. “We issued a public notice with the names of all these companies in all leading newspapers,” the source said.
“We believe that the documents given to us to draw up an agreement are authentic as they are provided by the government. How can one further verify the company or their line of work or antecedents? Our job is to provide space after seeing proper documents. We did just that, so why are we under the scanner,” asked the company spokesperson.
“We don’t know anything about the companies and their business. We are just landowners who provide space. It is not our business to poke around and verify the companies,” another official said.
The News18 expose has put the entire co-working industry on alert. During the pandemic and lockdown, several firms approached co-working spaces to register their companies or use it as a base for their virtual offices. But fraudsters found the perfect opportunity to register fake companies and create a web of deceit.
“Co-working places allowed many companies to operate easily, especially during the lockdown. Fraudsters are using people who are in the business of faking electronic KYC and other documents and causing problems to landowners. Not just us, the entire co-working industry is going through this challenge. There are no physical verifications conducted by the government, it is only EKYCs and they are being misused,” said a spokesperson of BricSpace to News18.
Co-working space providers say that many companies use their address to register and shift locations when the lease expires. However, they do not intimate the Registrar of Companies (ROC) and the address stays on the database.
“Some of the companies with expired leases committed fraud and the agencies came chasing our address,” explained a company official. “Even if we do pre-verification or checks, fraudsters can easily slip through. We are caught in the middle.”