New Delhi: The Enforcement Directorate (ED) on October 29 conducted search operations at multiple locations in Mumbai against Varanium Cloud Ltd and its promoter Harshavardhan Sabale, in connection with what officials describe as a sophisticated financial racket disguised as a tech growth story.
According to investigators, the company had raised nearly ₹40 crore through its September 2022 initial public offering (IPO), claiming the funds would be used to establish edge data centres and digital learning hubs in smaller Indian towns. The company marketed itself as a fast-growing player in digital media, blockchain, and EdTech, gaining traction among investors through polished presentations and associations with reputed business figures and media platforms.
But authorities now allege that the promised projects never materialized. Instead, the money appears to have been routed through a network of dummy entities and mule accounts—a finding that has placed the company and several associates under close scrutiny.
Inside the “Drawer Company” Network
Preliminary ED findings describe a well-coordinated racket operating from a cluster of small offices in Mumbai. Investigators say the group used forged KYC documents, fake identities, and proxy communication channels to open hundreds of mule bank accounts.
Over 400 cheque books and 200 SIM cards—some linked to dual SIM mobile phones issued in the names of local residents—were recovered during searches. These tools, officials say, were used to run “drawer companies”, shell firms that existed largely on paper but served as conduits for fund layering and laundering.
The network reportedly leveraged these entities to move money between accounts, obscure financial trails, and simulate commercial activity. Laptops, hard drives, and other digital evidence seized during the raids are now being analyzed for data trails of fund transfers and communication records.
A “Pump and Dump” Playbook Unfolds
Officials believe that the scheme followed a pattern consistent with a “pump and dump” operation, a manipulation technique used to inflate stock prices artificially before offloading shares at peak value.
Investigators say Varanium Cloud’s financial records revealed circular transactions and inflated turnover figures designed to project exponential growth. The company’s stock value surged in the months following the IPO, buoyed by optimistic projections and aggressive marketing. However, subsequent trading patterns showed sudden large-volume sell-offs, leading to steep losses for ordinary investors.
According to the ED, these actions were not incidental but part of a deliberate strategy to deceive the market and siphon funds through shell networks. The agency has now traced more than 150 front and dummy companies believed to be part of the operation.
Tracing the Money and the Motives
The ongoing probe, conducted under the Prevention of Money Laundering Act (PMLA), 2002, aims to unravel the full scope of fund diversion and identify other connected individuals and entities. Officials suggest that the money trail points to layering and routing of illicit proceeds, with possible offshore linkages under examination.
While no arrests have been made yet, the ED has indicated that several associates of the company are under active scrutiny. The seized devices and documents, authorities say, contain incriminating digital correspondence and transaction data that could expand the investigation’s reach beyond Mumbai.
