India’s Bitcoin scam volume could be as high as US $128 billion


The volume of the GainBitcoin scam that surfaced some months ago and continues to rock India’s already faltering economy, could be as high as Rs. One trillion (US $ 128 billion) with over one lakh victims having lost their deposits.

So far, 40 First Information Reports have been filed by victims across the country (13 FIRs in Maharashtra and Punjab).

The investigators now suspect that the mastermind Amit Bharadwaj, who died of a cardiac arrest couple of months back, may have collected 385,000 t0 600,000 Bitcoins. The Indian cops had arrested Bharadwaj in March 2018.

The scheme launched by Bharadwaj and his accomplices was simple like any other ponzi scheme. The investors were promised a return of 10 percent for 18 months, via multilevel marketing, with the expectation that more investors will join forming a pyramid of investors and thus help repay the previous batch of investors till the enterprise collapsed.

Bharadwaj started the first retail online platform of virtual currency which accepted cryptocurrency in 2014, six years after a Japanese pseudonymous agency or person invented the system. A year later he set up GBminers and some years later his own company GainBitcoin.

The investigators suspect the total value of fraud committed could go higher because Bitcoin prices remain volatile and dropped from its all-time high of around US$ 68,000 in November last year to its current price around US$ 21,000.

If the current Bitcoin price is taken into account, Rs. 23,57,250 per Bitcoin (around US $ 30,000) then the total comes to nearly Rs. 90,500 crore (US $ 90.5 billion).

The Pune Police have so far traced over 60,000 user IDs and email addresses.

GainBitcoin’s easy run hit the first hurdle in 2017 when the company found itself short of funds to repay the investors as the investment base had not increased in the previous fiscal. A graduate engineer, Bharadwaj had left his cushy job at Infosys to venture into the emerging cryptocurrency market, and authored books on cryptocurrency for beginners, cryptocurrency mining and cryptocurrency trading.

After hitting the hurdle, Bharadwaj and his associates devised another scheme where they shifted the payouts to an in-house crypto token MCAP or Mining Capital. Though there were few takers for the scheme, the previous investors found themselves to have forced to switch to the new token system.

By then Bharadwaj had moved to Dubai and operated from there. He had also set up a string of companies from Middle East to South East Asia, also British Virgin Islands, Estonia and USA and bought properties in Dubai.

While Bharadwaj was at the top, he had his “Seven Stars” to manage the daily operations in India.

The flaw in Bharadwaj’s model was the limited availability of Bitcoins.

Currently, all eyes are on Ajay Bharadwaj, the brother of Amit Bharadwaj, the prime accused in the scam.

In March, the Enforcement Directorate (ED) urged the Supreme Court to issue direction to one of the accused in the GainBitcoin scam to provide access, username and password, to his crypto wallet, contending that the issue of “legality of cryptocurrency” does not arise in the matter, as it is a ponzi scheme.

“The investigation conducted so far has revealed that Amit Bhardwaj (who died in January this year) with the connivance of petitioner, Vivek Bhardwaj, Mahender Bhardwaj and others i.e, multi-level marketing agents and associates have collected 80,000 bitcoins as proceeds of crime,” said the ED affidavit.

The ED told the apex court that the brother of the petitioner has died, and he is in possession of the username and password of crypto wallets, which must be disclosed to the investigating officer. The petitioner’s counsel submitted that some material is in custody of Pune police.

Next month, the Supreme Court pulled up Ajay Bhardwaj for not complying with its direction to divulge details of the username and password of cryptocurrency wallets to the ED.

Still, several crypto wallets belonging to the accused that were used for cryptocurrency collection purposes are yet to be traced.

Earlier this month, the ED raided six locations, including in Delhi, as part of a large investigation into the alleged scamming of over 1 lakh investors.

The investigative agency seized numerous electronic devices and crucial papers, according to reports.

Numerous officers and attorneys linked with a Delhi-based law firm were also subject to raids, the reports said.