The Enforcement Directorate (ED), India’s financial crimes watchdog, has filed a formal complaint against Bengaluru-based fintech startup SIMPL, alleging violations of the country’s foreign exchange laws involving funds exceeding Rs 913 crore.
The complaint, filed under Section 16(3) of the Foreign Exchange Management Act (FEMA), accuses SIMPL and its Director, Nitya Nand Sharma, of receiving foreign direct investment (FDI) from the United States and issuing convertible notes without proper approvals—allegedly bypassing mandatory regulatory permissions.
The ED launched an investigation after receiving what it called “credible information”, suggesting that the company had secured substantial foreign capital under the automatic route by categorising its business as “Information Technology and other computer service activities,” while actually operating in the financial services sector.
“During the course of investigation under FEMA, 1999, business model and revenue generation model of M/s One Sigma Technologies Pvt Ltd were examined and the same revealed that M/s One Sigma Technologies Pvt Ltd is into the business activities which fall under financial activities,” the agency said in a statement on Wednesday.
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According to the ED, SIMPL received FDI worth Rs 648.88 crore and issued convertible notes totaling Rs 264.88 crore—all under the automatic route. However, under the RBI guidelines issued in 2016, financial services not regulated by a financial sector regulator require prior government approval to accept FDI.
“Further, in activity where government approval is necessary for receiving FDI, any startup company can issue convertible notes only with the approval of the Government of India. However, M/s One Sigma Technologies Pvt Ltd has issued convertible notes without obtaining any approval from the Government of India,” the ED said.
The buy-now-pay-later startup offers interest-free Pay Later services, pay-in-3 instalment options, utility bill payments, and a one-click checkout network.
Last year, the company underwent a series of layoffs that resulted in the departure of nearly 200 employees. Simpl has raised over $80 million in funding across more than four rounds from investors including Green Visor Capital, IA Ventures, and Valar Ventures.
Edited by Megha Reddy
