Indian Police Arrest Man Operating Ponzi Schemes Exploiting Cryptocurrency
Crypto craze is at its peak in India, even though it has cooled off slightly around the world. As reported in Indian Express, the Indian police have arrested Kamal Vishnoi, a man who allegedly set up a fake bitcoin trading platform and tricked several investors into using it.
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The bitcoin hype in the country and lack of government regulations in the crypto space have led many fraudsters to launch fake crypto businesses, hoping to trick amateur investors who wish to get rich quick.
The police said the scam Vishnoi operated was similar to a separate multi-level crypto marketing racket run by two individuals who were arrested a few weeks back by the Cyber Cell unit. The scam defrauded several people for millions of dollars.
Illegal Crypto Platform and Cryptocurrency
According to the police, Nitin Gupta — one of the victims of Vishnoi’s alleged scam — lodged a complaint. The case was registered under IPC sections 420,406, and 20-(B) by the Economic Offences Wing (EOW). Vishnoi was charged under IT Act, 2000 – primary law in India dealing with cybercrime and electronic commerce.
As Indian Express reported, police sources pointed that Vishnoi launched a business that infringed RBI guidelines. He held seminars and events to lure investors and gain their trust, before vanishing with their money.
Gupta revealed that Vishnoi started what looked like a legal bitcoin trading platform, but which was entirely fraudulent, in 2016. Additionally, he presented an opportunity to investors to invest in Bitcoin and gain 5 percent daily interest.
“I met Vishnoi last year. He was offering several plans at 4-5 percent interest rate on a daily basis. He also offered me a referral plan, wherein I would get a commission rate for the number of people referred. I asked my close friends to invest,” said Gupta.
Invest 103 BTC and Receive 200 in Return
As per the police, investors had to first register themselves at a site called “Bittradingz” and then move their digital assets to personal e-wallets. Gupta invested 103 bitcoins, and in return Vishnoi promise to almost double the return, by returning 200 bitcoins in 30 days. This never happened. The major issue with the case is most transactions were done by cash, making them difficult to prove it in court.
In March last year, Vishnoi told investors that he was unable to pay the 5 percent interest and instead proposed to pay 2 percent, which investors agreed to. Meanwhile, Vishnoi launched yet another website called “Softcoinstradingz” and a new digital currency “Soft Coin”. Vishnoi demanded investors to invest 25 percent in the new Soft Coin currency.
His last contact with clients was in May last year, after which he absconded and cut all his communication links. However, the police have since arrested him, and now Gupta and other plaintiffs want their money back. As India has no regulation surrounding cryptocurrencies, it is unknown how the government will forward.
Government Warns Public of Ponzi Schemes
The Indian government on several occasions has warned crypto investors to safeguard themselves from Ponzi schemes floating around in the crypto space. In the past, the Reserve Bank of India and Securities and Exchange Board of India (SEBI) have expressed their concern that complete lack of a regulatory framework could even encourage e-Ponzi schemes.
December last year, a SEBI official stated, “SEBI cannot allow gullible investors to be taken for a ride with unlawful promises by these exchanges and those claiming to “mint” cryptocurrencies. A number of them are suspected to be indulging in fraudulent activities without actually minting any such virtual currencies that require very complex algorithms. ”
The present unregulated state of the crypto space is not only an issue for investors, but also the government. At present, the Indian government is flustered due to the absence of a regulatory framework for such investments.
Is it high time governments set a clear regulatory framework surrounding crypto space? Let us know your view in the comments section.
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