The Directorate of Enforcement has filed a case against fintech company Simpl and its founder and director Nithya Nand Sharma for alleged violations of the Foreign Exchange Management Act 1999. The agency stated that the total value of the contravention stands at Rs 913.75 crore.
According to the enforcement agency, Simpl received foreign investment meant for technology-related products and services but diverted the funds into financial services without the required approvals from the government or financial regulators. This has been marked as a violation of foreign direct investment rules.
Simpl, which operates under the legal name One Sigma Technologies Private Limited, reportedly raised foreign investment amounting to Rs 649 crore and issued convertible notes worth Rs 265 crore. These investments were made under the 100 percent automatic route, where the company declared its business activity as information technology and computer services.
However, the ED said the company’s actual business and revenue model fall under financial services. It cited guidelines from the Reserve Bank of India, stating that foreign investment in financial services that are not regulated by any authority must go through the 100 percent approval route.
The statement from the agency added, “For activities where government approval is necessary for receiving FDI, a startup company can issue convertible notes only with the explicit approval of the government of India.”
Simpl has not yet issued a response regarding the case. The company was founded in 2016 and works in the buy now pay later space. It currently has over 26000 merchants on its platform, including brands like Zomato, Makemytrip, Big Basket, 1MG and Crocs.
In 2021, Simpl announced a Series B funding round of 40 million dollars led by Valar Ventures and IA Ventures. This came four years after its Series A round in 2017. However, in 2024, the company went through two rounds of layoffs, affecting over 200 employees including mid to senior level staff. The layoffs came amid rising cash burn and a slowdown in new user growth, pushing the firm to reduce expenses.
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