Bitcoin News — BitConnect
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- Tags: BitConnect, Business News, Class Actions, Crime, Lawsuits, Legal, News, Silver Miller
Posted by Kevin Helms on
The securities department of the US state of North Dakota has issued orders against three companies promoting initial coin offerings in the state. They are Bitconnect, Magma Foundation, and Pension Rewards. The investigations are part of Operation Cryptosweep which involves over 40 US and Canadian securities regulators. Also read: 160 Crypto Exchanges Seek to Enter Japanese […]
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- Tags: Bitcoin, BitConnect, BTC, commissioner, crypto, Cryptocurrencies, Cryptocurrency, Digital Currency, magma coin, N-Economy, North Dakota, operation cryptosweep, pension rewards, Regulation, Securities, US, Virtual Currency
Posted by Kai Sedgwick on
Cryptocurrency scams take many forms. But one thing they all share is the goal of enriching their founders at the expense of investors. If a crypto project is “investing” a large portion of its capital into lavish parties, PR stunts and marketing, there’s a strong chance that it’s a scam. Also read: Debit Card Issuer Bitnovo […]
The post Bad Cryptocurrency Projects Have Squandered Millions of Dollars appeared first on Bitcoin News.
Posted by Marie Huillet on
Cointelegraph investigates the murky web of incidents connected with the Bitconnect heist, from Texas to Gujarat.
An American musical prelude
Bitconnect, the now-defunct crypto lending and exchange platform that has been ousted as a ruinous Ponzi scheme, has memorably been compared by the Silver Miller law firm to the fleeting 2011 Broadway musical “Wonderland,” based on the dizzying impossibilities of Alice’s adventures in Lewis Carroll’s celebrated novel.
Silver Miller’s first class action complaint was filed on behalf of six defrauded Bitconnect investors in late January, just weeks after the Texas Securities Commissioner issued an emergency cease-and-desist order against Bitconnect for the selling of unlicensed securities.
The complaint unconventionally opened with the following lyrics:
“Welcome to Wonderland / Where everything you see / I mean from ‘A’ to ‘Z’ / Ain’t what it seems to be. / Welcome to Wonderland / Set phasers up to stun / Turn off the lights when done / Good luck and thanks a ton / Ciao, baby, gotta run!”
In the ensuing months, the federal court for the Southern District of Florida has appointed two lead co-plaintiffs for the class action’s third amended complaint, who will represent all potential plaintiffs in the case. One of the lead plaintiffs, said to be domiciled in Dubai, alleges his out-of-pocket investment loss at Bitconnect totaled 150.28 Bitcoin (BTC), valued at the time at over $1.6 million.
If the musical allusions have sadly disappeared from the most recent court documents, the number of potential plaintiffs looks set to burgeon. David Silver told Cointelegraph in an interview that the law firm “anticipate[s] thousands of people filing claims if and when this case gets certified and we hopefully recover assets to disperse.”
According to Silver, plaintiffs were duped into taking the Wonderland-like impossibilities of the Bitconnect looking glass for “improbable possibles” and clung to the “sliver of a chance” that the high-yield investment scheme was legit. As cited in Silver Miller court documents, Bitconnect described itself as an “all-in-one” Bitcoin and crypto platform, where:
“It is entirely possible to find the independence we all desire, in a community of like-minded, freedom-loving individuals who, like you, are seeking the possibility of income stability in a very unstable world.”
This purported “income stability” amounted to the promise — regardless of the amount of the initial investment — of a one percent daily return, which Bitconnect alleged would be “generated by its own proprietary trading bot and volatility software.” According to this Wonderland algorithm, a $1,000 investment stood to return $50 million within three years of daily compounded interest, as the first Silver Miller complaint noted.
Bitconnect is alleged to have run a global Ponzi investment scheme as of late 2016 that enlisted multi-level affiliate marketers through a referral program that rewarded them for luring investors to purchase Bitconnect native tokens (BCC) on the Bitconnect BCC exchange, using either Bitcoin or fiat currency.
These investors were solicited to participate in the so-called Bitconnect lending program, pitched as an “opportunity” for them to lend their BCCs back to Bitconnect, which the firm would then use its “trading bot” to generate “guaranteed” profits on their behalf, of the aforementioned astronomical proportions. Those who successfully solicited further investors were promised even higher returns.
It further marketed a Bitconnect staking program, in which investors were given the offer to hold their BCCs in the platform’s Bitconnect-QT wallet as yet another means of pocketing hefty profits.
While Silver Miller’s action represents the ongoing U.S. private litigation against the scheme — parallel to which federal muscle has also been working — recent developments in India have exposed a murky web of incidents that taint the highest echelons of the country’s political class.
The case’s corporate defendant, Bitconnect, while hiding behind a shadowy U.K. address, has wreaked havoc through its army of recruiters that range from viral American Youtubers — resulting in Youtube’s own implication as a defendant in the Silver Miller class action — to shrewd promoters in the moneyed state of Gujarat, the home turf of India’s current prime minister.
At the fulcrum of the Indian chapter is the city of Surat, known for its diamond moguls and textile export tycoons. Cointelegraph spoke to Kashif Raza of the Indian crypto litigation duo ‘Crypto Kanoon’ to investigate the scandal; an ever-thickening plot of alleged kidnappings and extortions, which has led to the arrest of a former lawmaker from India’s ruling party just this week.
“Curiouser and Curiouser!” Cried Alice
If Wonderland is known for the Queen of Heart’s imperious command to paint white roses red, in Modi’s post-demonetization of India, Google trends showed a startling spike in one particular search query that hoped for an equally dubious chromatic transformation: “how to convert black money into white money.”
As part of Prime Minister Narendra Modi’s attempts to clamp down on tax evasion, in November 2016, he announced the government would be invalidating 500 and 1,000 rupee bills — which accounted for 86 percent of the currency in circulation at the time.
“Black money” is a term used to describe undeclared income that escapes taxes, and Modi gave Indians until Dec. 30, 2016 to deposit their soon-to-be-defunct high-denomination notes, whose sum total was worth a staggering 15 trillion Indian rupee ($208 billion).
The subsequent panic reportedly saw some 45 billion rupee ($650 million) flow in to Gujarat’s wealthy port city of Surat, to be hidden away in assets including cryptocurrencies, according to an accountant interviewed by Bloomberg last month, who asked to remain anonymous.
This was the fertile soil in which Bitconnect’s India chapter took root. And over the course of the next year, as Bitcoin soared to all-time industry highs, so did the BCC token. But in January 2018, after receiving its first warnings from U.S. regulators, Bitconnect shuttered up shop, triggering a crash in the token, which plummeted from its Dec. 29, 2017 high of $437 to almost zero.
The subsequent crimes and misdemeanours of livid Bitconnect investors are alleged to have taken place in February, although they first came to the public’s eye only in April.
Malice in Surat
On Feb. 23, a Surat-based builder by the name of Shailesh Bhatt charged into the office of Gujarat state home minister Pradipsinh Jadeja and claimed that 10 Amreli-district cops had kidnapped and extorted him for 176 BTC, worth 9.45 crore* rupee (around $1.31 million).
* A crore rupee denotes 10 million rupee and is equal to 100 lakh rupee in the Indian numbering system (1 lakh denotes 100,000 rupee)
The band of 10 was alleged to have comprised not only rank-and-file constables, but to have included Superintendent (SP) Jagdish Patel, as well as local Crime Branch Inspector, Anant Patel.
As a builder and “businessman” reportedly known to have a penchant for Bitcoin trading and other “business verticals,” Bhatt is said to have been among those who declared their hidden incomes under the Modi government’s Income Declaration Scheme (IDS) after demonetization.
On Feb. 9, he alleged that state Central Bureau of Investigation (CBI) officer Sunil Nair threatened him over the phone and summoned him to the Gandhinagar CBI office, where he was allegedly beaten in a ‘torture room’ and asked to pay 10 crore rupee ($1.38 million).
Bhatt claimed he had been primed for the call by one of his business aides, Kirit Paladiya, who is alleged to have warned him that local authorities — supposedly both the Enforcement Directorate (ED) and the CBI — had him under close watch for his dealings in crypto.
After his initial confinement by officer Nair, Bhatt is said to have argued his ransom down to 5 crore rupee ($693,450), which is said to have been paid via a so-called ‘hawala’ broker.
Then, on Feb. 11, Bhatt claimed that Paladiya called him for a meeting in Gandhinagar, where they were both abducted by a band of cops in official government vehicles near a fuel station and whisked off to Keshav Farm House at Chiloda.
There, Bhatt alleged, "they beat me up inside a room and threatened to kill me in a fake encounter if I did not hand over my Bitcoins":
"Amreli SP Jagdish Patel and Amreli inspector Anant Patel were involved. I was forced to transfer 13 crore rupee [$1.8 million] in Bitcoins to Paladiya's account."
The plot thickened. For not only were the crème-de-la-crème of state police implicated, but Bhatt accused Paladiya himself of double-crossing him in cahoots with his influential uncle, a former Member of the Legislative Assembly (MLA) for the ruling Bharatiya Janata Party (BJP), Nalin Kotadiya:
"I contacted Paladiya post-demonetization in 2016 to invest my money. He advised me to invest in Bitcoins and knew about my investment."
He further claimed that Kotadiya himself pressured him into paying the ransom. More on Kotadiya later.
By April 9, the Gujarat’s elite Criminal Investigation Department (CID) had filed a First Information Report (FIR) against the 10 implicated cops, even though Director General of Police (DGP) CID Ashish Bhatia stated at the time that:
“The FIR has been filed on the basis of evidence found by the team so far. In his application, Shailesh Bhatt had mentioned the transfer of 200 Bitcoins worth 12 crore rupee [$1.66 million] from the digital wallet of his business partner, Kirit Paladiya. Another 32 crore rupee [$4.4 million] were allegedly paid for their release from a farmhouse. Later, 78.5 lakh rupee [$108,872] were allegedly paid to get the Bitcoins back. All these transactions mentioned in the application could not be proven.”
On July 20, the Indian Express covered a chargesheet which the Gujarat CID is said to have filed before a sessions court in Ahmedabad the previous day. The chargesheet outlined how the now-jailed and suspended SP Jagdish Patel had allegedly been in “constant” communication with his junior, Inspector Anant Patel, with the band of cops alleged to have received 1.32 crore rupee ($1.83 million) in booty from Paladiya following Bhatt’s abduction.
As per the chargesheet, on Feb. 16, Anant is alleged to have given 9,087,575 rupee ($125,797) to SP Jagdish, who sent this money to his relative, one Bhavesh Jagdish Patel, a resident of Thaltej, Ahmedabad. The money is said to have been delivered by Anant and two local crime branch (LCB) cops in government vehicles. At Bhavesh’s house, the money was allegedly counted, with 1 lakh rupee ($1,387) deemed to be “missing”:
“The money was counted again and 10,000 rupee [$139] was found to be missing. Bhavesh then called Jagdish and told him about it, to which Jagdish said, ‘No problem. You keep the bag that has 90 lakh rupee [$124,821].’”
Then, when word broke of Bhatt’s Feb. 23 complaint at the Home Ministry, Jagdish is accused of contacting Anant and organizing for the booty to be moved from Bhavesh’s house to a friend, one Hardrik Mahida.
“On March 6, Jagdish Patel was in Ahmedabad. At that time, accused Anant Patel was trying to cover up his crime and also demanding money for legal expenses for himself and other accused policemen. The then Amreli district Superintendent of Police gave 40 lakh rupee ($55,476) to Anant Patel to cover up his role and also policemen of his department […] [Jagdish handed over] 40 lakh rupee to Anant Patel and his staff Vijay Vadher, Sanjay Padmani and Pratap Der on April 6 at Pakwan cross roads, Ahmedabad. Jagdish’s presence has been captured in the CCTV footage.”
The chargesheet, citing further CCTV footage as evidence, then accused the suspended SP of approaching Bhatt’s friend Dharmendrasinh Gohil’s house at Pachchai village in Bhavnagar to — euphemistically — “reach a compromise.”
After this ploy allegedly failed, Jagish is said to have thrown “mobile instruments and SIM cards into the Sabarmati river” — the very devices that would have incriminated his scheming with the co-accused Anant and Ketan Patel.
A wolf in sheep’s clothing?
In parallel to emerging details of this quagmire of police corruption, the now-infamous extortion case made an about-turn when Bhatt himself was accused of an earlier — and even more explosive — extortion of a staggering 1.55 billion rupee ($215 million) worth of crypto and cash at gunpoint — including around 2,400 BTC — from two colleagues of a local Bitconnect promoter, Satish Kumbhani.
As CID’s Bhatia has reportedly stated, Kumbhani of Surat “floated” a company called Bitconnect and “lured people like Bhatt to invest for huge returns. Bhatt ended up investing 2 crore rupee ($277,380) in BitConnect [token]. However, its promoters shut shop in January 2018 and went underground.”
In a press note, the CID is reported to have stated that Bhatt’s misdemeanours were uncovered when its sleuths went on the trail of how he had himself acquired the hefty sum of Bitcoin of which he claimed to have been robbed.
The sleuths uncovered two earlier kidnappings — this time allegedly masterminded by Bhatt himself — involving nine accomplices, which included the builder’s nephew Nikunj Bhatt.
In apparent vengeance against those responsible for the Bitconnect heist, Bhatt and nine others are said to have posed as local tax officers and kidnapped a small-time Bitconnect employee named Piyush Savaliya on Jan. 30. Savaliya is said to have been held hostage at gunpoint, also at a shadowy farmhouse — so apparently beloved by Gujarat’s criminal underworld — but this time one located in Surat.
When Savaliya claimed he was unable to avail the men of their desired crypto, according to Bhatia:
“[The next day, Feb. 1], Bhatt’s men kidnapped Dhaval Mavani at gunpoint [...] [who was] also attached with the bankrupt firm BitConnect. Bhatt’s accomplices forced Mavani to transfer 2,256 Bitcoins, worth 131 crore rupee [$18.2 million] into their account. The builder and his accomplices also transferred another 166 Bitcoins, worth 9.64 crore rupee [$1.34 million] into their account.”
The CID’s press release reportedly added that Bhatt and his cohorts extorted a further 14.50 crore rupee ($2.01 million) in cash, which was secured through a local ‘angadia’ — an informal network of Gujarati couriers.
Bhatt is reported to have distributed the spoils among his nine accomplices, keeping around 700 BTC for himself and allegedly asking his tech-savvy nephew, Nikunj, to make the transactions.
When the sleuths tracked the beleaguered Savaliya down, he claimed Bhatt had paid him 34.50 lakh rupee ($47,848) to keep silent and to release a “false” statement denying the kidnappings. Mavani, for his part, was reportedly warned never to be sighted in Gujarat again: Police sources claim he has left the country.
As the allegations against Bhatt’s shady past surfaced, the builder himself absconded. Speaking to local media outlet The Quint, the builder’s lawyer said:
“The charges levied against him are false and part of a larger conspiracy. There is no Savaliya or Mavani; in fact, Mavani was not even in India when the alleged offence transpired. The police [are] fabricating the whole story about Savaliya getting 34 lakh rupee ($47,066) for staying mum.”
Nonetheless, both Nikunj Bhatt and a further alleged accomplice, Dilip Kanani, were arrested in May on charges of kidnapping and extortion, with CID reportedly recovering 152 Bitcoins worth 8.5 crore rupee ($1.18 million) from the duo.
Conspiracy, take two — this time, a failed one
Another chargesheet floating around, which was also filed by the Gujarat CID in July, alleges that when the accused policeman themselves got wind of Bhatt’s earlier crimes, they themselves met on Feb. 15 at a hotel in Ankleshwar in Surat to conspire to silence him and prevent him from lodging his complaint at the Home Ministry.
They are then said to have redoubled their efforts Feb. 21, when Inspector Patel, lawyer Ketan Patel, his brother Jatin Patel, Kirit Paladiya and an “independent witness” Vishal Sakadsariya are said to have met at yet another hotel to further scheme about ways in which to prevent Bhatt from coming forward.
The chargesheet alleges that Ketan and Anant Patel attempted to trace the vanished Mavani — even sending four fellow cops to pursue him all the way to Mumbai — in what emerged as being a false trail.
Mavani’s whereabouts are still unknown.
At this point, you’d be forgiven for losing track of the countless names and double-crossed co-conspirators allegedly embroiled in the case. As Times of India jocularly reported, the CID detectives faced a similar headache and have reportedly created monikers for the different “protagonists” of the many-tentacled incident based on the “unique passwords of their Bitcoin e-wallets or phones”:
“We identify Ketan Patel as “Loq,” and Shailesh Bhatt as “Choco,” a CID official is reported to have confessed.
“Icing on the cake”
In Cointelegraph’s correspondence with Raza Kashif, he sketched out the political backdrop of the unfolding crypto scandal, with its tarnished cops, victims-alleged-perpetrators and even former BJP lawmakers accused of being behind-the-scenes puppeteers:
“As we know, General elections are due to be held in India in April or May 2019 to constitute the 17th Lok Sabha. The opposition parties in India are leaving no stone unturned to corner BJP.
“The Indian National Congress (INC, often called Congress party) has been trying to prove that ‘Demonetization’ was a tactical blunder and [the] Bhartiya Janta Party (BJP) took this step to make their own black money into white money.
“The Bitconnect scam proved to be the icing on the cake for the opposition parties, as the name of the main protagonists is a former BJP MLA and he has been arrested by the Ahemdabad crime branch recently.”
Kashif referred to the arrest of the aforementioned ex-Member for the Legislative Assembly for the BJP, Nalin Kotadiya, the uncle of Bhatt’s allegedly duplicitous former aide, Kirit Paladiya.
Kotadiya was remanded in police custody just on Sept. 10.
Let’s backtrack to the immediate aftermath, when Kotadiya was first tainted by Bhatt’s brush.
In late April, after the allegations of extortion and conspiracy, with the disgraced band of rogue Amreli cops against him had surfaced, Kotadiya at first attempted to hit back, dismissing the claims as misinformation, with the bizarre defense that:
“I am a man of public life. I meet people and talk to them on the phone. It does not mean I am involved in criminal acts with the people I meet or talk to on the phone.”
Kotadiya more pointedly drew attention to the fact that the alleged BTC transfers remained to be proven, quipping that “if the Bitcoins were not transferred, the question that arises is where the money came from.” He claimed that SP Jagdish Patel was being “pressured” to implicate him in the case and even more explosively that:
“Bhatt accepted that he was investing money from people affiliated with political parties. To protect them, attempts are being made to fix me in the case.”
He then circulated a WhatsApp video, reposted on Youtube in late April, in which, attired in pink, he claimed he had duly informed authorities about the Bitcoin heist and attributed the full blame for the extortion scandal and conspiracy to Bhatt.
As one alleged conspiratorial mastermind accused another of the selfsame, Kotadiya moreover threatened to leak evidence that would implicate even more local politicians in the scandal.
By mid-May, despite Kotadiya’s protestations, his failure to turn himself in led a local Ahmedabad court to issue an arrest warrant against him. The CID’s plea reportedly alleged that the accused former-BJP figure had evaded the unit’s clutches:
“There is material evidence substantiating the allegation of [crimes] against Kotadiya. It has also emerged from the record that though summons were issued twice, Kotadiya, despite promising cooperation, did not present himself before the investigating agency.”
The CID plea alleged that in early May, Kotadiya had sent the agency a fax saying he would appear before them on May 12, but then failed to do so. On May 7, he was also reported to have released a press statement claiming he was being “framed by the conspirators.” But CID’s plea is said to have pressed on, stating that:
“We have concrete evidence against Kotadiya. He is a politically influential person. His evading arrest could be could be an attempt to delay the investigation and create hindrances to it.”
Meanwhile, May 4 saw the arrest of Kirit Paldiya, Bhatt’s accused former aide and Kotadiya’s nephew. His interrogation is reported to have revealed that Paladiya — in complicity with Kotadiya, the Amreli police SP and inspector, and lawyer Ketan Patel and his brother — had plotted to apportion the extorted Bitcoin spoils between them, allegedly reserving 15 percent to be split between Kotadiya, the lawyer, and his brother, and 15 percent to be split between the police officers.
Kotadiya himself is alleged to have received 66 lakh rupee ($91,535) — of which Paladiya is said to have given 35 lakh rupee ($48,540) in total to two family members through a Surat-based angadia firm. 25 lakh rupee ($34,672) of this was said to have been recovered by CID officials at the time.
As Kotadiya himself remained underground, by mid-June, an Ahmedabad sessions judge declared Kotadiya a "proclaimed offender" (absconder) under section 82 of the Code of Criminal Procedure (CrPC ) in response to an application by the CID and asked him to appear before the court within 30 days.
Scathing news reports at the time pointed to Kotadiya’s political background, as well as characterizing him as a “leader” of the Patidar caste, a socio-economically prominent lineage within Gujarati society.
Nabbed “fast asleep” on a construction site
Just last week, Kotadiya’s time was finally up.
On Sept. 10, the Times of India reported that the ex-MLA for the BJP had been nabbed after four months in hiding. He was reportedly found “fast asleep” on the second floor of the under-construction railway quarters in Amalner, in Dhule, Maharashtra.
He is alleged to have been hiding out there with laborers for the past two months, according to Deepan Bhadran, deputy commissioner of police for the Ahmedabad crime branch. The Times further claims that Kotadiya had eschewed using mobile phones to make sure he was off-grid, using relatives’ and other borrowed cars to travel between locations. A crime branch source is quoted as saying:
“When we [eventually] found him, he was sleeping on a mattress and there was just an earthen pot of water in the room.”
An Amreli-born contractor at the Amalner railway quarters is said to have first noticed him, giving the golden tip-off.
As Raza Kashif noted, the BJP’s embroilment has been a political gold mine for the opposition party, the Indian National Congress (INC).
In early July, senior congressional leader Shaktisinh Gohil alleged that the “mega Bitcoin scam” was being used to cover-up shifty conversions of black into white money by the members of the majority BJP party.
As Kashif wrote in his correspondence with Cointelegraph, Gohil claimed that the Gujarat scam had emerged as involving “more than $726 million (5,000 crore rupee) [...] with some reports pegging the figure at $12.7 billion (88,000 crore rupee).”
Gohil used the case for all the political mileage he could muster, demanding a Supreme Court-monitored investigation into the matter:
“The finger of suspicion of this massive scam of illegal cryptocurrency directly points to several top Bharatiya Janata Party leaders and a mastermind — an absconding BJP leader and former MLA Nalin Kotadiya.”
As the Deccan Herald bitingly put it, Gohil alleged that “extortion of crypto using government authorities at the behest of top BJP leaders in Gujarat has become a norm,” claiming that “political pressure” had muscled in on the local CID to hush the case up and launch the subsequent complaint against the Surat builder:
“Instead of [Bhatt] being the complainant in the first case, the CID at the behest of MoS Home made the police the complainant […] Who are the top BJP leaders against whom Kotadiya has damning evidence? We demand an impartial Supreme Court-monitored judicial investigation.”
Gohil’s allegations further claimed the Bitcoin had been widely used to carry out “illegal hawala transactions” post-demonetization, something he implied would not have surfaced were it not for the scandal first unearthed by Mr. Bhatt.
As Kashif outlined in his correspondence, Gohil drew upon the full extent of the alleged Bitconnect scandal — which extends well beyond the web of alleged extortions and kidnappings we have mostly been tracing so far:
“[News of the Bitconnect scam] transmitted a shockwave in the country at a time when the nation was already trying to recover from India’s biggest bank fraud case of $2 billion (over 13,000 crore rupee), a fraud [that had been] planned and executed by [diamantaire] Nirav Modi and his uncle Mehul Choksi. The Bitconnect fraud is six times bigger than the [aforementioned] bank fraud, which took all the headlines in the Indian media.”
As the Times of India has reported, tracing the full extent of Bitconnect’s tentacles in India — by which we mean pointing to a figure less wildly obscure than Gohil’s benchmark bracket of anywhere between $726 million and $12.7 billion — brings a unique hurdle, in that many of its investors are accused of laundering their “black” cash into the scam post-demonetization.
Even after Bitconnect scrammed late January — leaving its defrauded investors wallowing in now-worthless tokens — the CID’s Bhatia told the Times that the bureau has received few complaints, allegedly because so much black money is thought to have been siphoned into the the scheme.
While the Times itself considers that the Bitconnect swindle may indeed have “siphoned off more money than Nirav [Modi‘s banking fraud],” Bhatia stressed:
“So far, we have received complaints for cheating worth 1.14 crore rupee ($158,106).”
Ciao baby, gotta run!
So what of the Bitconnect promoters themselves? Has the protective cloak of black cash and the newsworthy distractions of lurid kidnappings and extortions really allowed them to get away scot-free?
Last month, police finally arrested a suspect, Divyesh Darji, who is said to have held “held seminars [and] events in India and other countries” promoting the Wonderland promises of Bitconnect. Darji, a resident of Surat, had reportedly already been issued with a look-out circular and was arrested on Aug. 18 in the Delhi airport, after a tip-off from local immigration services.
In his interview with Cointelegraph, Raza Kashif described Darji as a local and respected “influencer,” who enjoyed a number of high-profile and esteemed local connections, which he presumably made excellent use of to propagate the Bitconnect affair.
Darji’s still-active LinkedIn profile claims — in somewhat shrill ALL CAPS — that:
“I AM HAVING DEGREE OF M.COM. LL.B., B.ED., N.D. & HAD EXPERIENCE OF TEACHING +2 STUDENT & COLLEGE FOR 25 YEARS. I AM GOOD NET WORKER AND HAVING GOOD LEADERSHIP QUALITIES. RIGHT NOW I AM HAVING ENOUGH KNOWLEDGE ABOUT CRYPTO CURRENCY AND BITCOIN AND MAKING WEALTH THROUGH THAT [sic].”
A recent Times article cites CID crime officials as alleging that Darji enjoyed “10 percent commission” on investments he brought in:
“He was fluent in English and ran several social welfare programs. He had a big following and Khumbani hence roped him in […] Darji had brought investments of 4,100 crore rupee [around $567.6 million], while the total amount invested in Bitconnect could be around 41,000 crore rupee [around $5.6 billion].”
As for Satish Kumbhani, he is reported to still be absconding. A senior CID crime officer is quoted by the Times as saying that the unit has “begun the process of getting a warrant issued against [him] and will then press for a red-corner notice (RCN)” to trace him:
“Kumbhani was tracked down to South Korea some time ago, but by the time we could react, he had flown back to Dubai. He supposedly handled the worldwide operations of the company and may have possession of a large amount of money in Bitcoins, which belongs to investors.”
As Raza shrewdly noted, the INC has to date called four press conferences in response to the Bitconnect-related scandals, capitalizing on its potential to tarnish the BJP ahead of the forthcoming elections. In the wake of multiple high-profile scandals, he added that:
“Back-to-back in the last five months, the magnitude of [a string of] frauds has come to 1 lakh crores rupee [around $13.87 billion]. For a developing country like India to face scams of this magnitude, [it] has shaken people’s confidence in the system.”
Raza noted that news of the Bitconnect-related extortions broke after the Reserve Bank of India’s (RBI) notorious circular directing all banks to extract themselves from relationships with crypto exchanges and traders had already been issued on April 5.
But Raza nonetheless stressed:
“News like this makes life tougher for the average crypto trader in India […] the opposition party [INC] is opposing cryptocurrency now, because they have said that the ruling party used crypto to make their black money white. Now, if they come into power, they will not positively regulate crypto, because if the current party [BJP] goes into opposition, they will turn around and say that ‘once upon a time, you used to trash us for our involvement in crypto, and now you yourselves are regulating it!’ So this is not a good sign actually.”
In his correspondence, he added that as they bide their time until the next date of hearings devoted to the RBI restrictions, India’s crypto exchanges and traders have found their “messiah” in the “form of the p2p model”:
“Timely regulation will help curb these scams to mushroom in India. The main protagonists, in this case, took the advantage of ‘fear’ and ‘negativity’ surrounding this industry in India. Possession of ‘Bitcoin’ is not illegal in India and most of the exchanges in India are self-regulated and follow stricter norms on KYC than banks.
“There is a huge challenge in India when you approach a police station to file a complaint against a Bitcoin fraud, as there is a high probability that you might be sent back without [them] even listening to your complaint. The fraudsters know this fact and they take maximum advantage of looting the general public in the name of high-return promises.”
As of press time, Shailesh’s Bhatt’s whereabouts remain unknown. With Kotadiya still remanded in custody, the case is poised to send further shockwaves through the crypto community and to provide further grist to the mill of India’s opposition politicians.
As the final scores in Bitconnect’s Gujarat chapter remain to be settled, globally, the scandal has meanwhile bequeathed to us one of the most jarring memes in industry history. Here is a viral video of one Carlos Matos, a Bitconnect recruiter born in the Bronx who “serenaded” the audience at the platform’s first annual ceremony in back in 2017, in Pattay, Thailand. Click ‘play’ at your peril.
Posted by Ana Alexandre on
Two U.S. states have asked Indian authorities to seize the property of the promoters of alleged BTC Ponzi scam BitConnect.
Authorities from two U.S. states have implored the Criminal Investigation Department (CID) in India to seize the property of promoters of Bitcoin (BTC) investment firm BitConnect, the Times of India reported September 11.
BitConnect, which ceased its operations in January of this year, was an open-source cryptocurrency and an investment program accused of being a Ponzi scheme. The accusations were based on the multi-level referral system and promise of astronomical returns on customers’ investments.
The U.S. states of Illinois and Arizona are asking the CID to seize the property of the promoters, who are suspected of raising Rs 41,000 crore (around $5.6 billion) from investors. Most of the funds were purportedly poured into the firm after the demonetization of high-value banknotes at the direction of the Modi government in 2016.
The CID claims that “those who invested in this virtual currency company after demonetization are suspected of laundering black money.” The agency added that it will request the probe of such investors by the enforcement directorate and income tax authorities.
Initially, the fraud scheme was reported by businessman Shailesh Bhatt, who claimed that he had been kidnapped and robbed of Rs 9 crore ($1.2 million) worth of BTC by local police. The CID said:
“The investigation found that Bhatt had invested Rs 2 crore ($275,000) in BitConnect and after the company shut shop in January 2017, he kidnapped an employee of BitConnect, Dhaval Mavani, and extorted Bitcoins, Litecoins and cash worth Rs 155 crore ($25 million) from him.”
At the end of August, Indian police arrested Divyesh Darji for allegedly promoting BitConnect and scamming investors. Darji, a resident of Surat city, reportedly said that he had been the India head of BitConnect. The CID claims that staff at the BitCoinnect office in Surat admitted that promoters had overall amassed “crores [tens of millions] of rupees from thousands of investors.”
Following the cessation of BitConnect’s activities, a number of users in the U.S. launched a class action lawsuit against the company, seeking compensation for lost funds, reportedly amounting to $771,000. The suite alleges that the BitConnect tokens were unregistered securities in a “wide-ranging Ponzi scheme.”