One of India’s self-proclaimed bitcoin gurus was found to be involved in a massive cryptocurrency scam by the Pune police. The accused Amit Bhardwaj, ran several cryptocurrency ventures namely GB21, GBMiners, GainBitcoin and MCAP. The scam is said to affect 8,000 people and scammed investors of 2,000 crores (over $307 million) in the state of Maharashtra alone. It is expected that the scam could run as big as 13,000 crores (over $2 billion). The accused was arrested by the police on Wednesday at Bangkok airport and brought to Pune for interrogation.
How the scam unfolded
GBMiners are touted as the biggest bitcoin mining space in India, second only to China. Bhardwaj grew to fame after writing a book titled ‘Cryptocurrency for Beginners’ which was promoted by several Bollywood stars include Shilpa Shetty, Huma Qureshi and Neha Dhupia. He started hosting events in Dubai which were attended by the likes of former adult film actress turned Bollywood actress Sunny Leone.
A former Infosys employee, Bhardwaj presented himself as entrepreneur par excellence and launched HighKart, the first bitcoin-based online retailer in the country. Using his celeb influence, he was able to create a system of duping people, especially some middle-class Indians and more than one lakh high-net worth individuals. Amit, his younger brother Vivek and 5 other partners in the business were called the ‘Seven Stars’ who floated several businesses together and posed as innovators in this space.
The idea was to make people aware of bitcoin and it’s potential. Once people saw that profits were being made, they launched several schemes under their new companies, asking people to engage in a Multi-Level Marketing platform. Like every other Ponzi scheme, existing investors called in their friends and got some returns. This continued on and on until the profits started drying up.
Bhardwaj was last seen publicly in March 2017, where he spoke on the ‘State of Cryptocurrency’ in March 2017. Before that, he was able to float several schemes to unsuspecting investor. People were being offered 180 percent returns on their investments over the next 18 months. Some other schemes offered 200 percent returns in 20 months. The money collected hence was used to mine more bitcoins by the Bhardwaj brothers and their partners. However, the Pune police suggests that none of them had any mining equipment or ability to mine bitcoins. They simply used it as a marketing gimmick.
Pune Police Commissioner Rashmi Shukla said, “They claimed they would be using the currencies invested with them to mine for Bitcoins. But none of that happened. In order to repay, they set up another company. During demonetization, they even accepted cash from investors.” Their companies used Aashish Dabas as the poster boy for their schemes who was pictured with several expensive cars and Dubai villas.
They also introduced their own cryptocurrency called MCAP for $5 a coin. The prices were artificially hiked to reach $8 a piece and the scamsters even went on to float an ICO for the same. The police believe that 8,000 people were duped by the scamsters but experts believe that more than 85,000 people were involved in this scheme.