Meet India’s biggest cryptocurrency scam

(Welcome to the first article of our article series — “Cryptocurrency & blockchain" where we would look at different aspects of the emerging technologies associated with blockchain & it’s affect on economics , technology & society )

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Well , there’s nothing new about the cryptocurrency scams , ponzi schemes and hacks in the world of blockchain & cryptocurrency— till this point , billions of dollars worth of cryptocurrency has been stolen either from centralized exchanges (More than a billion dollars worth of cryptocurrency has been stolen alone from Mt. Gox and Coincheck exchanges [1] [2]) or from the malicious wallets [3][4] , but none of these hacks or scams have had as much profound effect on a nation’s policy towards a cryptosystem as this scam , as it became a propelling reason for India to put a ban on all cryptocurrency exchanges [5][6] — This is the story of the bitcoin evangelist turned conman Amit Bharadwaj and his companies in the 300 million USD cryptocurrency Ponzi scheme [7]. And though 300 Million USD might be a smaller amount in comparison to CoinCheck or Mt. Gox’s hack but the effect it had was much bigger especially on the lower middle class members.

Amit started out as an Indian version of Roger Ver , as a bitcoin evangelist and nobody could deny the fact that he has played a huge role in educating and introducing bitcoin to the Indian investors , traders and users. The initial investors too were able to withdraw their investment , but something went downhill from that point [8]. He ran multiple companies which includes AmazeMiners, GB Miners [9], GainBitcoin and CoinBank under the parent company Amaze Mining And Blockchain Research Ltd, registered in Hong Kong. He had even gone on to coin a new cryptocurrency, MCAP [10][11].

Mathematics gone wrong

The main reason behind his arrest was his promise of “10 % monthly return for 18th months of investment in Bitcoin” — and producing such an output isn’t feasible for Bitcoin or any other cryptocurrency . Being an Multi-level marketing business, there were incentives for everyone provided they add more investors under their teams. Amit took the money in Bitcoin and promised to return 10% in Bitcoin. This was not just an inflated idea but actually a fraud idea because no one can return more Bitcoins than they actually collect , if the return would have been promised on the conventional currency then perhaps Amit’s business model could have been successful , because of the meteoric rise in the price of Bitcoin where it’s price went from <$1 to over $19000 (at it’s peak) in a matter of few years.

Beginning of the “Big Fall”

The change.org petition to arrest Amit Bhardwaj.

Change.org actually made a change this time. Everything started from a change.org petition filed by a Zakhil Suresh [12] , an accountant from Kodungallur, a small port town on the Malabar coast in Kerala as he was an investor in GainBitcoin & had invested about $1500 in it — an amount which he had pulled out of his savings and the money borrowed from his parents and friends. After this petition came out , Zakhil got a call from someone who claimed to be promoter of GainBitcoin from Mallapuram ,Kerela and he promised to pay up for any losses for Zakhil in the condition that the change.org petition would be removed , but the payment would be made by a different entity & GainBitcoin. This deal felt apart when Zakhil made a condition that the amount should be paid by GainBitcoin itself , but the promoter from Mallapuram failed to do so.

The Arrest

The Pune Mirror article.

As it turns out no fraud can run for a longer period of time and so Bharadwaj was finally arrested at Bangkok after hundreds of GainBitcoin investors filed complaints against him. [13][14][15]. The story doesn’t stops here because as it turns out , the famous indian angel-investor Nikunj Jain had also been arrested in this matter [16][17].

The fallout

It is totally reasonable to look this scam as one of the major reasons behind the Government of India’s decision to block all bank accounts associated with any entities dealing with cryptocurrency , because this scandal had effected thousands of middle class families , who didn’t had enough technical information about Bitcoin and associated entities and though crypto-currencies do not directly harm the Indian economy , but the effect of such scams affects the good-will of the rising india.

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