Flower traders or crypto kingpins? IT uncovers Rs 330 crore hawala racket in Malappuram

Malappuram: The Income Tax (IT) Investigation Wing has unearthed a major hawala racket involving cryptocurrency transactions allegedly operated by two Malappuram natives running a flower export firm. Officials said the racket was exposed following a three-day search operation across multiple locations in Malappuram and Kozhikode districts.

According to IT officials, the probe began after suspicious financial activity was detected in the accounts of a flower export company that had been trading with Indonesia for several years. Investigators found that instead of using formal banking channels, the firm’s owners had been receiving payments through cryptocurrency.

To disguise the money trail, the accused reportedly created several crypto wallets under the names of various individuals, including students. One of the suspects is believed to have been operating from Malappuram and Kozhikode, while the other is currently based in Saudi Arabia.

Preliminary findings suggest that cryptocurrency transactions amounting to nearly ₹330 crore were routed through these digital wallets. Officials stated that the final amount could rise once a full audit of the wallets is completed.

The IT Department is expected to refer the case to the Enforcement Directorate (ED) for further investigation under the Foreign Exchange Management Act (FEMA), citing potential violations of foreign exchange rules. The ED is also likely to examine the case under the Prevention of Money Laundering Act (PMLA).

Authorities have not yet revealed the names of the suspects as the probe continues. The case highlights growing concerns over the misuse of cryptocurrency networks for illegal cross-border financial operations in India.

The ongoing investigation marks one of the largest crypto-related hawala probes in Kerala to date. Officials said that the suspects used multiple intermediaries and digital assets to obscure the origin of funds.

The flower export business reportedly served as a front to legitimise the inflow and outflow of money from Indonesia. The use of students’ and associates’ names to create crypto wallets further complicated tracking efforts.

Searches by the IT Department in Malappuram and Kozhikode yielded electronic evidence, including transaction records, mobile devices, and computers allegedly used in the operation.

The department is expected to coordinate with the Financial Intelligence Unit (FIU) and international crypto exchanges to trace fund movements and identify foreign recipients.

Authorities said the case underscores how small export firms are increasingly being used as fronts for illegal currency transfers, bypassing India’s financial regulations.
(With PTI inputs)