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Paytm case: A tech billionaire and the bumbling blackmailers

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Mumbai : The Indian state of Uttar Pradesh has a reputation as a rough place, with one of the highest levels of crime in the country. In May, a dozen local politicians received WhatsApp messages that threatened harm to their families unless they paid $14,000.

Yet even by local standards, an extortion plot that’s surfaced in recent weeks stands out for its sheer outlandishness. It’s the case of a celebrated startup founder, Vijay Shekhar Sharma, who allegedly was targeted by one of his most trusted lieutenants for millions in ransom. The billionaire entrepreneur created India’s most popular digital payments service called Paytm.

Local police have arrested Paytm vice president Sonia Dhawan, her husband and another Paytm employee for allegedly stealing Sharma’s personal data so they could extort money. The three are in custody at Luksar Jail in Noida, the New Delhi suburb where Paytm is headquartered. Authorities are hunting for a fourth person, who allegedly made ransom calls to Sharma. A lawyer for Dhawan and her husband denies they did anything wrong.

 

Key questions remain unanswered. Why would a nine-year veteran of Paytm turn against her boss when she had so much to lose? Were Dhawan and her suspected collaborators pressured to act against Sharma by the true culprits, as Sharma himself has suggested? What is the data the group allegedly stole? The investigation touches on one of India’s most successful entrepreneurs, whose backers include Masayoshi Son of SoftBank Group Corp. and Warren Buffett of Berkshire Hathaway Inc.

‘Everybody’s fascinated by this unraveling story,’ asked Sanchit Vir Gogia, founder and chief executive officer of Greyhound Research. ‘It involves a famous, very vocal person like Vijay Shekhar Sharma. Paytm’s done exceptionally well so there’s an emotional connection as well.’

Sharma, now 40, founded One97 Communications, the parent company of Paytm, in 2000 when fewer than 10 million Indians were online. He tried offering search services, ringtones and Bollywood movie songs before landing on the idea of digital payments. The business soared after the India government eliminated 500- and 1,000-rupee banknotes at the end of 2016, in a bid to end corruption. With the stroke of a pen, 80% of the country’s paper money disappeared.

“Overnight, we went from a new thing to a must-have,” he told Bloomberg News in a profile last year.

One97 is now worth $10 billion, according to CB Insights, making it the most valuable startup in India. Sharma’s empire also includes the online retailer Paytm E-Commerce Pvt, backed by China’s e-commerce giant Alibaba Group Holding Ltd.

Sonia Dhawan started working at One97 in January of 2010, according to her LinkedIn profile. Recently promoted to vice president of communications, she was well known in media circles in India, fielding press calls and arranging interviews for Sharma. She also liaised with government officials and overseas partners. Given her equity interest, Dhawan’s position would have likely grown increasingly lucrative as Paytm expands and heads for an inevitable an initial public offering.

“Hard work is glory, everything else is theory,” she wrote on her Twitter page.

According to police, she allegedly hatched the extortion plot with her husband, a property consultant named Rupak Jain; a colleague, Devendra Kumar; and a fourth person, Rohit Chomal.

The idea was allegedly to steal personal data from Sharma, with Dhawan’s access to his passwords and computers, and then use the data to get cash, according to local police. Dhawan, Jain, Kumar and Chomal couldn’t be reached for comment.

Sharma got the first call from his purported blackmailers in September. A man said he had Sharma’s personal financial information, and demanded the equivalent of about $2.7 million or it would be released to the public. The perpetrators had taken a hard disk containing the information, according to a four-page police document called a First Information Report.

“It’s a case of blackmail and extortion with stolen personal data and sensitive business plans,” said Manoj Kumar Pant, the police officer heading the investigation in Noida.

Still, these appear to be bumbling blackmailers. Sharma purposefully ducked the extortion calls four or five times as they tried to extract money and then insisted they deal with his brother because he was too busy. When Ajay Shekhar Sharma, who also works at Paytm, pressured the caller for details, the alleged extortionist simply blurted out the names of his three co-conspirators, according to local press.

Ajay Shekhar Sharma then filed a complaint with local police in October. They recovered a hard disk from Kumar, who confessed and implicated Dhawan and her husband, according to the police.

Sharma’s net worth is estimated to be close to $2 billion, making the extortion attempt more distraction than financial threat. A far bigger challenge for Paytm is holding off global rivals like Google Pay and WhatsApp Pay in a digital payments market forecast by Credit Suisse to grow to $1 trillion by 2023.

‘Paytm runs the risk of getting slightly maligned over its handling of data,” said Gogia.

Sharma didn’t respond to requests seeking comment for this article.

The case has fueled intense speculation about Dhawan’s purported motive, if she is guilty, and how she could have landed in jail with such speed. Prashant Tripathi, a lawyer representing the couple, said she hasn’t done anything wrong.

“She is absolutely innocent and has no connection with the theft of data or extortion,” he said in an interview, adding that she had been framed by professional rivals in the office. He wouldn’t explain why he hasn’t tried to get the couple out of jail ahead of any trial. “I await instructions from the Dhawan family,” he said.

The police and Paytm are at odds over what kind of data was stolen. While investigating officer Pant told Bloomberg News that the theft included the company’s business plans, Paytm insists personal data was nabbed. “Paytm would like to reiterate that all our consumer data is protected with the highest and most impenetrable levels of security,” it said in a statement.

Sharma has made it clear he doesn’t think the whole story of the blackmail attempt has been told. In a brief conversation with the Economic Times last week, Sharma said his lieutenant is probably innocent and a ‘conduit of someone else’s bigger plan.”

‘I don’t know how many more people were involved in this sad conspiracy,” he said. “I am shocked and surprised at things that happened and some claims or theories being pitched. I am sure with support of police and everyone involved we will uncover the details soon.’


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RBI asks banks to grout ATMs to wall, floor for security by September-end

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Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.

In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.

Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.

 

As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.

Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.

Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.

The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.

The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.

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SBI refuses to disclose communication from RBI, govt on electoral bonds

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New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.

Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.

The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.

 

“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.

The bank also refused to give any details of action taken by it on such communications from the RBI and the government.

The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.

The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.

Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.

The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.

The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.

A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.

ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.

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Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting

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New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.

GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.

In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.

 

Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.

The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.

Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.

GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.

In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.

The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.

“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.

With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.

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