In the humid backstreets of Kerala’s Malappuram district, a modest flower export business had long appeared to operate like any other small trading firm—sending consignments of fresh blooms to Indonesia. But last week, it became the unlikely centerpiece of a sprawling investigation into a crypto-based hawala network worth more than ₹330 crore.
Officials from the Income Tax Department’s Investigation Wing said raids were conducted across multiple locations in Malappuram and Kozhikode, where the firm and its operators allegedly funneled payments through cryptocurrency channels instead of the formal banking system.
The network, investigators believe, represents a new wave of digital hawala—one that blends traditional money transfer routes with borderless, anonymized crypto transactions.
From Flowers to Foreign Wallets
Authorities say the export firm was managed by two men, one based in Malappuram and the other in Saudi Arabia. Over several years, the duo allegedly received payments for flower shipments entirely in cryptocurrency.
To obscure the money trail, they reportedly created multiple digital wallets under the names of local students and acquaintances. Investigators have identified dozens of such wallets, used to receive and transfer funds across jurisdictions with little trace in India’s formal financial records.
“The transactions—so far estimated at ₹330 crore—were layered across platforms and converted through privacy coins and mixing services,” said an official involved in the probe. “It’s a complex structure designed to mimic legitimate trade.”
Cross-Border Flows and a Legal Crossroad
The department suspects violations under the Foreign Exchange Management Act (FEMA) and is expected to transfer the case to the Enforcement Directorate (ED) for deeper scrutiny. The alleged transactions, officials noted, also raise questions about potential breaches of the Prevention of Money Laundering Act (PMLA).
Preliminary evidence points to the use of international crypto exchanges, making the investigation dependent on cooperation from foreign regulators. The ED, which has handled similar crypto-linked money-laundering cases in the past, is expected to analyze blockchain records and digital wallets seized during the raids.
Cracking Down on the Crypto Shadow Economy
India’s financial authorities have stepped up surveillance on crypto intermediaries in recent months, following a surge in illicit financial flows routed through virtual assets. The Financial Intelligence Unit (FIU-IND) recently directed all virtual digital asset (VDA) service providers to conduct cybersecurity audits and strengthen KYC verification systems.
FIU-IND estimates that one in four cybercrime cases in India now involves cryptocurrency, often used to hide stolen assets on darknet markets or through untraceable privacy tokens.
The Kerala case, officials say, is emblematic of how crypto’s borderless architecture is transforming the landscape of underground finance—moving it from hidden alleys to encrypted ledgers.
