Indian authorities have arrested two individuals accused of operating a bitcoin ponzi scheme that swindled some 300 bitcoins, approx. $2.6 million in current prices, from 5000 victims.
The duo, alleged to be running a multi-level marketing (MLM) scheme that incentivized investors to lure in others into the scheme, promised high returns on bitcoin investments through a company called Bitmineplus. The company encouraged investors to deposit or buy bitcoin from the company, which it then held, to offer monthly returns as high as 12%, details from its still-functioning website reveals.
According to The Times of India, the platform began soliciting investments upon launch in December 2016 and, in addition to the 12% returns, offered 5% referral income for early investors with an additional 10% in commissions for bringing in additional people.
An investigating official said:
Their basic idea was to kick-start a multilevel marketing scheme involving bitcoins. The people were given monthly payouts and additional income for referring the scheme to more people.
After paying investors their returns in bitcoin initially, the company began offering dividends in ‘BMP’, its own custom-created cryptocurrency that offered no value. Eventually, the operators fled with their investors’ money before law enforcement caught up and apprehended the two individuals.
“Jangra [the mastermind behind the ponzi] had planned to shift his investors to his own cryptocurrency after getting a good sum of investment, but rising debt and the daily pressure from his investors made him flee with the money,” a senior police official said.
The company, which threw lavish parties at 5-star hotels to gain investors’ confidence, ultimately lured over 5,000 individuals for over a year before the scheme collapsed in February 2018.
“We have identified at least 5,000 IDs which have been duped,” Deputy Commissioner of Police (cyber Cell) Anyesh Roy said on Sunday, according to the Hindu. “For the first few months, the income came in but eventually, it stopped after which the investors started to ask questions.”
Cryptocurrency-related fraud continues to be prevalent in Asian countries with conmen justifying unrealistically high short-term gains by purporting to invest in cryptocurrencies.
Earlier this month, a major cryptocurrency-related ICO fraud in Vietnam saw authorities, including the office of Vietnam’s prime minister, crack down on a sweeping scheme that conned 32,000 citizens out of a reported 15 trillion dong, about $660 million. A similar nation-wide Chinese pyramid scheme purporting to be a blockchain platform swindled 80 million yuan ($13 million) from 13,000 investors earlier this year.
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