Bitconnect Scam: How Indian Investors Lost 22,000 crore in the Bitcoin fraud



It was a ‘too good to be true deal’ from its onest but the investors in their greed for the lucrative 1% daily interest chose to ignore all the alarming bell. To be fair to the hordes of rich investors in Gujarat, it was seemingly a simple yet foolproof solution to launder their black money after demonetization in November 2016. Who knew that in just one year the phony Bitconnect platform will pocket roughly Rs 22,000 crore of their money in Bitcoin.

According to an article in Times of India, Sunny Vaghela, CTO of an Ahmedabad-based IT firm stated:

“The transactions were anonymous, it did not require any proof and, best of all, it could be operated from anywhere in the world. A cryptocurrency boom started overnight.” 

Notably, during that period most Google searches for laundering money were recorded from Gujrat, as per a Boomerang report. In their plight to hide or re-direct money Indians were willing to pay up to  25% more for Bitcoin.

The Bitconnect Scam

2017 witnessed a hike in Bitcoin prices like never before. The price of one Bitcoin shot up from $900 to $20,000 and it became a must-have asset. During this time came a similar sounding but an unrelated cryptocurrency, Bitconnect. Bitcoin owners were offered 1% daily interest and more if they got other owners on board.

On paper, the scheme faired well and thus Investors started loaning their Bitcoin to Bitconnect. In turn, Investors received BCC, Bitconnects own token currency; all principal and interest payments were also made in BCC as well. The very fact that they are signing away their precious Bitcoins should have been alarming. But when they wore the rose-colored glasses of high returns, the classic Ponzi scheme sounded like the best thing ever.

The scheme was quite simple, Bitconnect had a fixed number of BCC ‘coins.’ Their value was directly proportional to its demand and the sky-high interest rate managed to push up the demand, concurrently raising their price. This went on until the securities boards of Texas and North Carolina put a stop to all this in January. An investor on the case said:

“The investors got happy with notional gains. The coins, bought at $50-100, became worth $362 in a year.” 

As the dealing stopped in January, BCC crashed to $2 overnight and now trades below half a dollar. Bitconnect immediately repaid their investors with practically nothing and walked away with their fair-share of bitcoins.

No Complaints

It may be the case that Bitconnect stole away more money than Nirav Modi, but the authorities did not receive as many complaints. The reason behind it, is simply that many of the investors used black money to buy Bitcoin. In a desperate attempt to recover their money, some influential investors switched to unlawful ways.

In March, Shailesh Bhatt, a Surat-based realtor lodged a complaint alleging some policemen for abduction and extortion of about 200 coins. After a dozen cops were arrested the name of  BJP MLA Nalin Kotadiya cropped in around July. A true Holywood style twist of the tale was introduced when the investigating officers discovered that Bhatt himself had abducted a BitConnect promoter to extort 2,256 Bitcoins. The whole master plan went south when one of Bhatt’s alleged partners in crime, Kirit Paladiya, double-crossed him.

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