Amit Bhardwaj, the arrested Ponzi scheme kingpin accused of scamming thousands by promising outlandish returns on investments in Bitcoins, has offered to pay back investors their initial investments in Indian rupees even as one of the country’s largest cryptocurrency exchanges, Zebpay, has been roped in to help with the investigation.
The initial responses of a few investors – dozens have filed police complaints in Pune, Mumbai, Nanded (Maharashtra), Kolkata, Delhi and others cities – seem to suggest that they will fight to get back the market value of their investments.
“We want the returns in (today’s) cryptocurrency value and not the value of the cryptocurrency when we invested. Today, the Bitcoin price is much higher than what it was when we invested. It is like Bhardwaj will keep the profits and just return the principal amount which is wrong,” said a victim, who asked to stay anonymous in this story because investigations are not complete.
More than Rs 1,000 crore is estimated to have been invested in the Bhardwaj-led GainBitcoin empire starting mid-2015. The value of this, measured by the value of Bitcoins today, is several times that amount.
According to investigating officers, cryptocurrency exchange Zebpay was called in to help with the investigation as a large volume of the transactions between the victims and Bhardwaj took place via its platform. “Zebpay is the platform through which investment and sale of bitcoins were done in this case, which is why they were called for an enquiry,” inspector Jayram Paygude of the Pune Cyber Crime Cell told FactorDaily.
Efforts by FactorDaily to reach Zebpay for comment have been futile so far. Calls, phone messages, and emails to its co-founders Saurabh Agrawal and Sandeep Goenka last week while reporting this story were not responded to. We will update the story if we receive a response.
Over the past few years, Bitcoin Ponzi mastermind Bhardwaj amassed wealth equivalent to the GDP of a small nation duping thousands of investors lured in by the promise of quick riches mining cryptocurrencies. He was arrested in April this year by the Pune police cybercrime division from Delhi.
The arrest was the result of a chain reaction set off by a Calling Attention notice in the Maharashtra state assembly by Rahul Kul of the Rashtriya Samaj Paksha who brought the matter into notice. In reply to the notice, the state’s minister of state for home Ranjit Patil had said that his government would ask the Enforcement Directorate, the central agency fighting economic crime, to probe allegations that Bhardwaj and his company GainBitcoin had swindled investors through its Bitcoin Ponzi schemes.
In recent weeks, as the police investigation meanders along in a case involving cryptocurrencies (a technology that few understand) across several international jurisdictions, there has been renewed pressure in the state assembly. Questions raised by legislators have led to the Maharashtra government constituting a Special Investigation Task Force last week. The team is headed by an additional director general-level officer with the state police’s economic offences wing.
During an assembly session held last week, Nationalist Congress Party member Hemant Takle raised questions about the delay in recovering the Bitcoins and the inability of the police to nab the remaining absconders in the case.
“It should be noted that offenses have been registered in Vashi police station, Nigdi police station, Nanded airport police station, and Khadakpada police station, the main accused have been taken into custody, but there hasn’t been recovery of any bitcoins in these cases,” the Nationalist Congress Party’s Hemant Takle said addressing the assembly. There has been laxity in efforts to arrest the accused, he added, pointing out that 10 people are absconding in Pune in one of the cases. “This makes one think whether the police is helping the accused in the case.”
Takle also raised the question regarding the compensation that Bhardwaj’s victims will receive pointing to the difference in prices of Bitcoin when investors gave the Ponzi king the money and the cryptocurrency’s prices currently.
Bitcoin, the most popular cryptocurrency in the world, whose price hovered around the $1,000 mark in January 2017 multiplied several times in value over the course of 2017 reaching a peak price of some $19,000 by the end of the year. From the start of this year, Bitcoin prices began tumbling and charted highly volatile territory before stabilising at the current price of $6,800.
In response to Takle’s statement, minister of state for home (rural) Deepak Kesarkar said that the difficulty in recovery of the money was due to the way in which Bhardwaj and his accomplices have invested the money collected. This statement was referring to the multiple real estate investments in Dubai and other countries that Bhardwaj has made.
“They have invested some amount through Bitcoin. Some of this amount is recovered by the police department through the e-wallets of these companies. The value of these digital currencies in the wallet will be recovered but it is difficult to recover the investment made in foreign companies,” Kesarkar said. The state’s laws allow sealing properties of the accused but properties in places like Dubai will not be easy to seize, he added.
Bhardwaj has bought multiple office properties in Dubai including some at premium locations such as Jumeirah Tower and Burj Khalifa, according to an earlier investigation report by the Pune cyber crime department, which was reviewed by FactorDaily.
Last month, the Pune police filed a 4,000-page charge sheet in the GainBitcoin case, according to a news report. A similar charge sheet has been file by Nanded Police but the investigation is still ongoing in many of the other regions where FIRs against Bhardwaj has been filed.
The police have also issued lookout notices against his brother Ajay Bhardwaj, father Mahendra Kumar, and lieutenant Ashish Dabas.
“The Pune police and Kolkata police have been trying to figure out cryptocurrency and blockchain experts to help them with the case. They have some people who are consulting them in this regard but, even then, he (Bhardwaj) is citing technical difficulty as the reason for his business going into a loss,” said the victim quoted earlier without name. “Bhardwaj is telling the cops that he did not foresee the mining difficulty of Bitcoin increasing so he was unable to keep up with the payouts to investors and that is why he has a loss in business.”
This source said Bhardwaj lawyers have been citing notifications by the Reserve Bank of India citing risks involved in investing in virtual currencies or cryptocurrencies as grounds for his client to be granted bail or let off the case. Investors should have known the risks of investing in Bitcoins, goes the reasoning.
Since December 2013, RBI has been cautioning users, holders and traders of virtual currencies, including bitcoins, about the potential financial, operational, legal, customer protection and security-related risks that they are exposing themselves to. This notice, over the years, has been reiterated multiple times by the RBI and has now become part of the standard response from the regulator for any queries regarding cryptocurrencies.
Meanwhile, Delhi-based software developer Darwin Labs, founded by Nikunj Jain, Sahil Baghla and Ayush Varshney, is also under investigation by the cyber crime department for its alleged dealings with Bhardwaj and work it did for his Gainbitcoin operations.
Jain and Baghla were arrested by the Pune cyber crime team in April. According to a news report, the investigating team traced email conversations between Bhardwaj, Baghla, and Jain on plans to send money collected from investments to other countries to save tax.
According to a source familiar with the company, Darwin Labs stopped operations after the arrests and its computers and systems have been seized by investigating authorities.
Darwin Labs had earlier raised funding from Amit Bhardwaj but CEO Baghla, later on, posted a clarification that Darwin Labs had been a software vendor for the mining operations of a Bhardwaj company and had later cut ties.
But according to the victim quoted earlier, Darwin Labs has continued to work for Bhardwaj and the investigation team was able to retrieve user data related to GainBitcoin (and GBMiners, another Bhardwaj company). Darwin is also said to have helped Bhardwaj develop GainBitcoin’s MCAP tokens. This could not be independently verified by FactorDaily.
We have reached out to Darwin Labs via its Facebook page for comment but have not yet received any response at the time of writing this story. We will update the copy once we receive a response.
Earlier in May, the Enforcement Directorate (ED) had registered a case under the Prevention of Money Laundering Act against GainBitcoin, Amit Bhardwaj, and eight others based on an FIR by Maharashtra police.
The ED had also recently summoned Raj Kundra, Bollywood actress Shilpa Shetty’s husband, in relation to this investigation, according to news reports. Kundra’s company Viaan Industries operates a poker league called Match IPL (Indian Poker League) and Bhardwaj had bought the rights for the Pune team for the franchise under the name Pune Knights. According to a statement by Kundra after the ED questioning, the deal with Bhardwaj did not go through as he failed to make the payment for the Pune franchise. Kundra has agreed to become a witness in the ED investigation.
According to another news report, the ED was also looking into questioning other celebrities such as Sunny Leone, Prachi Desai, Neha Dhupia, Huma Qureshi and Nargis Fakhri, besides Shetty. They were involved in GainBitcoin promotions earlier.
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