EOW investigates Rahul Yadav and his wife for Rs 288 crore fraud

The Mumbai Police's Economic Offences Wing (EOW) is investigating Rahul Yadav, the founder of a property start up, for allegedly mishandling Rs 288 crore ($38 million) of investor funds, leading to the company's collapse in just three years. Additionally, there are compelling suspicions that a portion of these misappropriated funds was diverted into another business entity where Mr Yadav's wife holds a co-ownership position.
Info Edge, the owner of Naukri.com, had invested heavily in Yadav's startup, 4B Network Pvt. Ltd. (also known as Broker Network). They provided Rs 276 crore across six tranches, securing about a 60% stake in the company, along with an additional Rs 12 crore as a loan. However, concerns about financial irregularities prompted Info Edge to file a complaint with the EOW.
The complaint meticulously outlined a series of highly suspicious transactions. These transactions involved extending loans to former employees, even during periods of the company's financial difficulties. It was also alleged that a substantial security deposit meant for office space was covertly redirected to another family-owned start up under the supervision of Mr. Yadav's wife, Karishma. Additionally, the complaint implies that vendors may have rerouted payments originally intended for Broker Network to various other family-owned entities. Rahul Yadav, formerly dismissed from Housing.com's board in 2015 due to investor conflicts, launched 4B Network in November 2020. The start up aimed to provide a tech-driven platform for real estate agents, earning commissions on successful deals.
Sources within his defunct firm deny wrongdoing, labelling these transactions as "related-party transactions." They attribute most issues at 4B Network to Info Edge's lengthy approval processes. The primary dispute between Info Edge and 4B Network centres around instant brokerage and invoice financing. This is the second complaint filed with the EOW on this matter.
In January 2021, under pressure from Rahul Yadav and another shareholder, Pratik Choudhary, committed to investing Rs 50 crore in 4B Network over 21 months, with the full Rs 276 crore eventually invested. Although 4B Network reported increased revenue, a significant portion was either reversed or remained uncollected, as per employees. Sources linked to the company attribute this to technical issues.
Info Edge declared an impairment due to the absence of significant returns on its investment. Between February and April 2023, Rahul Yadav presented a proposal for a Rs 20 crore investment from a Dubai-based 'friend,' valuing 4B Network at Rs 50 crore, which would dilute Info Edge's 60% ownership. However, the deal reportedly collapsed as Info Edge insisted on knowing the source of the funds, expressing concerns about potential diversions of the Rs 276 crore investment.
The core allegation against 4B Network revolves around misleading representations used to induce Info Edge's investment of Rs 288 crore. It is alleged that these funds were subsequently siphoned through illicit means, causing significant financial harm to investors.
The EOW is currently investigating potential legal breaches and gathering evidence for prosecution in Yadav's case. This situation underscores the importance of transparency and accountability in start-ups, particularly where regulatory oversight may be lacking. It emphasizes the need for thorough due diligence before significant investments and maintaining robust corporate governance standards to protect investor interests and ensure sustainable growth.

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EOW investigates Rahul Yadav and his wife for Rs 288 crore fraud

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