Indian investors lose billions in Bitcoin scam

Chris Lee

Indian investors who have recently opted to stay away from the volatile stock market are throwing their lot into cryptocurrencies. Presently, there is a craze for crypto and the demand for these alternative currencies is at an all-time high.

Cryptocurrency is not regulated in India and this has allowed unscrupulous actors to offer investment opportunities involving digital coins. However, the Reserve Bank of India has banned all transactions related to cryptocurrencies.

Financial experts believe that demonetisation implemented by the Indian government in November 2016 had a major role to play in this decision. Many people had stockpiled money at home that they had not declared to the tax authorities. When the demonetisation occurred, they did not know what to do with this money. As a result, it prompted them to launder the money by investing in cryptocurrencies, and overnight cryptocurrency investment schemes flourished by promising investors significant returns. However, most were scams and these schemes petered out without a trace.

BitConnect was one such scheme that was promoted by a man named Satish Kumbhani. The cryptocurrency firm pledged to pay investors 1% interest on a daily basis on Bitcoins while doubling investment value in 100 days. The company was successful in attracting rich investors from across India. Most wanted to launder their money without getting caught by the tax authorities, and also earn money without worrying about paying taxes on it.

Sunny Vaghela, CTO of an IT firm based in the Indian state of Gujarat, said that the bitcoin transactions were anonymous and this was instrumental in starting a bitcoin boom in India. The majority of the so-called bitcoin investment firms were located in the city of Surat.

BitConnect created its own currency, BitConnect Coins, that investors received in lieu of bitcoin deposits. The firm promised a return of 40% or more. The aim was to increase the demand for its own currency. This led the firm to inflate the value of its currency from USD $50 to USD $362 within a year, added a US-based investigator who is involved in investigating the BitConnect scam.

However, the scheme fell apart after the company was hauled up to the securities boards in Texas and North Carolina. Overnight, the BitConnect Coins lost value and reached a paltry USD $2. Now, the coins trade for a meagre USD $0.5.

According to experts, BitConnect was a ponzi scheme. The promoters collected bitcoins – valuable throughout the world – and in return they gave investors a currency that had no value or backing.

In fact, from the very beginning, many investment experts were calling BitConnect a scam. However, the investors refused to believe this as they were promised high returns.

The Indian police state that they have not received many complaints about BitConnect. This could be because most investors were using the firm to launder ill-gotten gains, according to a police officer investigating the firm.

Later, the investigators found that an investor himself had kidnapped the BitConnect promoter, Dhaval Mavani, and his employee and demanded ransom.


Chris Lee

Latest news

Cybercrime still on the rise – be wary of potential scams
While our attention may be drawn to the latest news regarding the COVID-19 pandemic or the Tokyo Olympic Games, cybercrime statistics continue to grow unabated in the shadows. Read more
How to Learn to Trade Unpredictable Summer Markets
Recent events in the financial markets have left traders and investors dazed and confused. Read more

Safest Forest Brokers 2020

Broker Info Best In Customer Satisfaction Score
#1 ForexTime LogoYour capital is at risk Founded: 2011 Global CFD & FX Broker
Number One Broker
BEST FOREX BROKER Visit broker
5
#2 ForexTB logoYour capital is at risk Founded: 2015 Global Forex & CFD Broker
Number One Broker
LOWEST FEES Visit broker
4.9
#3 Tickmill forex broker logoYour capital is at risk Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#4 BlackBull MarketsYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#5 Forex Broker Pepperstone LogoCFDs and FX are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
4.9

    Forex Fraud Certified Brokers

    City Index Logo
    Plus500 Small Logo
    skilling logo
    HYCM Logo
    AvaTrade logo
    IQ Option Logo
    Forex.com Logo
    BlackBull Markets Logo
    Vantage FX logo
    Exness Small Logo
    FXTM Logo
    IC Markets Logo
    Pepperstone
    XM Logo
    LegacyFX Small Logo
    ATFX Logo
    OctaFX Logo