Police in the west Indian city of Surat have arrested a local resident on suspicion of stealing tens of millions of rupees from Indian investors after tricking them into investing Bitcoin in a suspected Ponzi scheme called BitConnect.
Divyesh Darji worked at the company’s headquarters in the city as a promoter. He was intercepted by immigration officials at Delhi Indira Gandhi International Airport after returning from Dubai.
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The arrest is part of a much wider crackdown involving tens of people and billions of dollars of stolen money.
BitConnect in India
The Gujarat Criminal Investigation Department says that the company had taken in more than $3 billion from Indian citizens before closing down in January 2018. In return, it issued around 28 million rupees’ ($401,520) worth of its cryptocurrency.
It was popular in India because in November 2017, Prime Minister Narendra Modi made 15 billion rupees’ ($215.5 million) worth of banknotes invalid as a tactic to combat tax evasion. Worried citizens looked for ways to store their cash, and BitConnect stepped in with an offer.
The offer goes like this: people give BitConnect Bitcoin in return for BitConnect Coin, the platform’s native token. The investor must then lend the BCC back to BitConnect, where ‘tradebots’ programmed to trade profitably will make a profit for them – in fact, a guaranteed 40 percent and as much as 120 percent a year. If that sounds suspicious to you, perhaps you should stop being so cynical!
Ashish Bhatia, Director General of Police at the Gujarat Criminal Investigation Department, explained to the Times of India: “The company was registered in the UK and had an office in Surat. They launched their own ‘bitconnect coins’ soon after demonetization. They promoted the company on social media and by holding gala functions in cities across the world. They lured investors with 60% monthly interest, and incentives in the form of ‘referral interest’.”
The police department has registered a case against the owners, administrators and promoters of BitConnect under relevant financial laws.
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The kidnapping that wasn’t
In April, nine Surat police officers were arrested on suspicion of kidnapping a man named Shailesh Bhatt. Bhatt was the person who began the investigation into BitConnect when he wrote a letter to Gujarat’s junior Home Minister Pradeepsinh Jadej in February, according to The Hindu.
He claimed that the policemen kidnapped him and forced him to transfer 200 bitcoins to them.
It then transpired that actually, Bhatt was the kidnapper. The kidnapee was one Satish Kumbhani, who had set up ‘Bit Connect Investment Company’ in 2017 and began promoting it. Bhatt fell for it and invested 18 million rupees in the company. After the company went down, he seized Kumbhani and two other BitConnect employees and demanded a ransom, which was not paid – hence the complaint.
Bhatt, whose accomplices included his uncle who is a former politician, is currently in hiding. One of the implicated policemen has also absconded. According to the Times of India, he extorted from his victims:
– 2,019 Bitcoin ($12,907,345)
– 11,000 Litecoin ($606,210)
– 145 million rupee ($2,079,590)
Police have recovered:
– 169 Bitcoin ($1,082,445)
– 8 kg of gold
Is this the end of the “crypto currecy revolution [sic]”?
BitConnect has no whitepaper, has been sued in multiple places, and served with cease and desist orders in Texas and South Carolina. Darji is the head of BitConnect in India; with him now in custody, it is safe to say that things aren’t looking good for the firm.