Ever since cryptocurrency and blockchain have came into existence, the clever and sinister minds of the world have brought Ponzi schemes to the platform. The world of crypto has also seen a number of fraudulent and illegal activities that have taken place leveraging the decentralization and anonymity of the platform to make money and sell drugs, weapons e.t.c.
A similar wave of fraud hit India, but this story spans continents and as a matter of fact, is linked to $3 billion worth of Bitcoin, Bloomberg reports.
The roots of the story lie in Gujarat, India’s westernmost state. The story begins with the incident when a property developer Shailesh Bhatt entered into the Home Minister’s house in Gujrat in February. Bhatt claimed that he had been victim of a kidnapping case where he was kidnapped by a group of police officers, who were demanding about 200 in BTC for his freedom.
The story was looked into by the CID, and as they went deeper into the case, it was found that there was humongous fraud attached to the whole case. Since then, 8 policemen have been accused and they are currently facing trial. CID found out that the kidnapping was led by Bhatt’s own associate Kirit Paladiya. The mastermind behind the abduction, however, wasn’t Paladiya, instead, his uncle Nalin Kotadiya made the plan, who also happened to be a lawmaker in Modi;s ruling Bhartiya Janta Party.
As the perspectives widened for the CID, Bhatt also got charged. Consequently, the first convict Paladiya is now sentenced to jail, while Bhatt and Kotadiya are in a phase of hiding. During this period, Kotadiya released a video of him saying that he was innocent, and instead blamed Bhatt to be the main person involved. Kotadiya also claimed that he had evidence that could implicate other politicians too. The video has interestingly been reposted on YouTube where in his native language he alleges Bhatt to be the main culprit.
The case also involves a company called Bitconnect which is alleged to have scammed people all around the world. The firm attracted people from all around the world, who deposited BTC to them in exchange of Bitcoin Tokens which they could lend to other people at an interest rate of over 40%, which could increase if people recruited others to invest in the token.
Trying to fulfill his promise of eradicating corruption out of the society, Modi made a move in 2016 to curb tax evasion. He ordered to invalidate banknotes worth of 15 trillion rupees. This move by Modi pushed the people of India to find ways to launder money, and the easiest way they found was to change it into crypto assets. Due to this, almost 45 billion rupees flowed into Surat, to be hidden in the form of crypto assets. In fact, when after the demonetization, the Indians were asked to bank their higher value notes or lose them, Indians became worried and began to search how to launder cash and turn black money to white money. According to google trends,
During this, the partial investments in BitConnect were also due to the dramatic surge in the price of Bitcoin. As the value of Bitcoin surged, the price of BitConnect also increased. Predicting more room for increase, Bhatt and other investors from Gujrat invested a total of $3.2 billion worth of Bitcoin into Bitconnect, according to the leading investigation officer of CID, Ashish Bhatiya.
“After demonetization, we were watching India,” said Kiran Vaidya, a product manager at Toronto-based U.Cash and a blockchain adviser to Canadian banks. “We’d seen how bitcoin rose after the Greece economic crisis and similarly after things went south in Venezuela. The volumes were so high that it was obviously people who had the capacity to move markets.”
The case wasn’t all about black money, some self proclaimed wits were also selling their houses and property to invest in the crypto market to double their investments.
The story saw a turn of events when a cease and desist order was filed against Bitconnect by the state of Texas, who invested into the fraudulent activities that the company was a part of. Once the cease and desist order was filed, other compains about fraudulent activities about the company started floating throughout India. The end of BitConnect put the tax evaders in danger as they couldn’t go to the authorities. If they did, they’d have to declare their investments.
So, to get the money back, Bhatt and his accomplices (Including Paladiya) thought of an evil solution because they had no other way out. They kidnapped two officials from Bitconnect and demanded a huge amount in BTC (2,256 BTC to be exact, according to the CID investigators). Paladiya wanted more of the share so he contacted his influential uncle Kotadiya. Kotadiya used his contacts in the local police to cheat Bhatt and extort his bitcoins. Paladiya was sure of his success as he thought Bhatt wouldn’t go to the authorities because he’d get caught there. The situation backfired for them, when Bhatt filed charges against them and got them convicted. Since then, Bhatt has gone in the wind, and denies any wrong doings.
Interestingly, the lawyer of Paladiya also denies any wrongdoings by his client and says he was a victim of the kidnappers and Kotadiya, in his video alleged Bhatt to be the main culprit in the case, with more influential names tied to the case (politicians).
This whole intricate series of events where accusations of tax evasion and police corruption, kidnapping of a kidnapper, a fugitive politician and billions of bitcoins were involved could be one of the biggest case of fraud in the history of Bitcoin, certainly the biggest in India.