India's Biggest Crypto Scam Is Bigger Than Expected, Could Affect 1 Lakh People

As more and more victims come forward, the total amount involved in the racket could come up to Rs 1 trillion.

Like most Ponzi schemes, GainBitcoin used a pyramid, multilevel marketing scheme to lure investors. 

(Photo: iStock)

The sheer scale of the GainBitcoin cryptocurrency scam that rocked the nation some time back is turning out to be way bigger than previously thought, with reports suggesting that around one lakh victims may have lost more than Rs 1 trillion in the scam.

A total of 40 FIRs were registered by victims (more than 13 FIRs in Maharashtra alone), and a large number of people from other states may have also lost their hard-earned savings in the GainBitcoin scam.

60,000 User Ids and Email Addresses Traced

Amit Bhardwaj, the mastermind who died of cardiac arrest earlier this year, may have collected Bitcoins anywhere between 385,000 to 600,000, amounting to more than Rs 1 trillion.

The amount may fluctuate as Bitcoin prices remain volatile and dropped from its all-time high of around $68,000 in November last year to around $21,000 now.

Taking the current Bitcoin price of around Rs 23,57,250 per Bitcoin, the total amount stolen comes up to nearly Rs 90,500 crore.

To date, more than 60,000 user IDs and email addresses have been traced by Pune Police in the GainBitcoin case, according to multiple media reports.

How the Scheme Worked

Like most of the Ponzi schemes, GainBitcoin also had a pyramid, multilevel marketing scheme, with Amit Bhardwaj at the top and then his 'Seven Stars' who used to operate in India and abroad.

They guaranteed a 10 percent monthly return in Bitcoin-on-Bitcoin deposits for 18 months via multilevel marketing programmes.

Investors were enticed to lend the corporation Bitcoins on the promise that their investments will be increased during the aforementioned period.

However, since there are a limited number of Bitcoins, the model was flawed, but several investors had put their money in by the time they realized that they had made a grave mistake.

All Eyes on Amit Bhardwaj’s Brother

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

In March, the Enforcement Directorate (ED) urged the Supreme Court to issue directions to one of the accused in the GainBitcoin scam to provide access, as well as the username and password, to his crypto wallet, contending that the issue of "legality of crypto currency" 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 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 Supreme Court that the brother of the petitioner has died, and he is in possession of the username and password of the crypto wallets, which must be disclosed to the investigating officer. The petitioner's counsel submitted that some material is in custody of the 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 the 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 one 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 subjected to raids, the reports said.

(Published in an arrangement with IANS)