New Delhi: A number of startup founders in India are under fire of the Enforcement Directorate, following the revelation of money laundering. The ED is exploring if other startups had been misusing foreign resources and transferring money using black channels. This has prompted concern to the startup world and cast real doubts on the manner in which funds are being managed.
Reportedly, the ED is reviewing bank accounts, company accounts and financial transactions of some founders. The primary focus is made on startups which were heavily invested in, but they were unable to demonstrate the appropriate growth of a business. Officials are aware that there is a possibility of some of the money going down the drain or even being transferred to other countries through counterfeit firms.
Indian startup ecosystem has been increasing at a rapid rate over the past decade. Foreign investors provided huge capital to many young founders. When the majority of startups operate in accordance with the law, there still are certain situations of abuse which may damage the reputation of the whole ecosystem. Analysts indicate that vigorous scrutinizing is required to ensure that the system is clean and credible.
Founders being investigated have refuted the claims and indicated that they are cooperating with the law enforcement. According to some of them, business losses are not supposed to be regarded as financial crime. Nonetheless, ED declares that it requires clear evidence to explain the spending of the money.
This has seen investors being cautious. Various funding transactions are currently taking a longer time because investors are reviewing records at companies to a greater level. According to legal people, this is a positive move to instil some form of discipline to the startup industry.
