Cryptocurrency Frauds In Indian Context
๐ 1. GainBitcoin Scam (Amit Bhardwaj Case)
Background:
This is one of the biggest cryptocurrency scams in India involving over โน2,000 crores. Amit Bhardwaj, founder of GainBitcoin and GBMiners, promised high returns through Bitcoin mining and investment schemes.
Modus Operandi:
Bhardwaj lured investors with monthly returns of 10% for 18 months under the pretext of Bitcoin mining operations.
He created a multi-level marketing (MLM) scheme, incentivizing people to bring in more investors.
Instead of real Bitcoin mining, new investorsโ money was used to pay earlier ones โ a classic Ponzi scheme.
Legal Action:
Arrested in 2018 from Dubai.
Multiple FIRs filed across India, including in Maharashtra, Delhi, and Uttar Pradesh.
Booked under Sections 420, 406, 120B IPC, and provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
Current Status:
He died in January 2022, but investigations and trials involving co-accused continue.
๐ 2. Morris Coin Scam (Nishad K Case)
Background:
In 2021, Kerala-based businessman Nishad K was accused of running a scam through a fake cryptocurrency called Morris Coin, defrauding thousands of investors to the tune of โน1,200 crores.
Modus Operandi:
Investors were asked to invest a minimum of โน15,000 in Morris Coin with a promise of โน270 per day for 300 days.
The scheme operated for over a year, attracting over 900 investors in Kerala and Tamil Nadu.
Funds were routed through shell companies and layered to avoid detection.
Legal Action:
Arrested by Enforcement Directorate (ED) and booked under PMLA.
ED attached assets worth โน36 crores, including luxury cars and properties.
Also charged under IPC Sections 420, 406, 34, and IT Act provisions.
๐ 3. Kolkata Bitcoin Fraud (Shilpi Jain Case)
Background:
In 2022, the Kolkata Police Cyber Cell uncovered a โน250 crore Bitcoin fraud involving a woman named Shilpi Jain, who operated an exchange platform offering fake crypto investment options.
Modus Operandi:
Promised high returns through crypto trading platforms.
Investors were shown fake dashboards with rising values.
Once significant funds were collected, the website and accounts were shut down.
Legal Action:
Jain was arrested and booked under Sections 419, 420, 406, 467, 468, 471 of IPC, along with Sections of IT Act.
Authorities recovered digital evidence including hard drives, crypto wallets, and fake ID proofs.
๐ 4. Flintstone Group Case (Sanjay Jhunjhunwala and Vivek Kapoor)
Background:
In 2020, the Flintstone Group was accused of running a Ponzi scheme under the guise of crypto investments and luxury tourism packages, amounting to over โน100 crores.
Modus Operandi:
Promoted a fake crypto coin called "KBC Coin".
Promised investment in global crypto exchanges and luxury travel plans.
Investors were incentivized with commissions for bringing in others.
Legal Action:
Investigated by Mumbai Police Economic Offences Wing (EOW).
Accused booked under IPC Sections 420, 406, and MPID Act (Maharashtra Protection of Interest of Depositors).
Properties and bank accounts were frozen.
๐ 5. Fake Crypto Exchange โ CoinX Trading Case
Background:
In 2022, CoinX, a fake cryptocurrency exchange, defrauded over 1,500 investors of โน40 crores across India.
Modus Operandi:
Created a professional-looking trading platform.
Displayed manipulated trading charts to simulate profits.
Once enough money was collected, the site was taken down, and customer support stopped responding.
Legal Action:
Accused were traced through IP addresses and arrested by Delhi Cyber Cell.
Charged under Sections 420 (cheating), 468 (forgery), 471 (using forged document) of IPC, and IT Act.
๐ 6. BitConnect Scam โ Satish Kumbhani
Background:
BitConnect was a global crypto fraud, but Indian national Satish Kumbhani, one of the key promoters, played a central role. The scam is estimated at over $2.4 billion globally, with significant Indian investor losses.
Modus Operandi:
BitConnect promised daily interest through a "trading bot."
Investors had to lock up their Bitcoin and were paid in BitConnect Coin (BCC).
It turned out to be a Ponzi scheme, collapsing in 2018.
Legal Action:
US SEC and Indian authorities began parallel investigations.
Kumbhani was charged by the US Department of Justice, and Indian authorities filed FIRs.
He was booked under Money Laundering Act, IPC, and SEBI regulations.
๐ Legal Provisions Used in These Cases
| Law | Relevant Sections | Application |
|---|---|---|
| IPC | 420 (cheating), 406 (criminal breach of trust), 120B (criminal conspiracy) | Fraud, deception |
| IT Act, 2000 | Sec. 66C, 66D | Identity theft, online cheating |
| PMLA, 2002 | Sections 3 and 4 | Money laundering of crypto proceeds |
| SEBI Act | If investment products were offered illegally | |
| Banning of Unregulated Deposit Schemes Act, 2019 | For Ponzi/MLM schemes |
โ๏ธ Conclusion
Indiaโs lack of clear regulatory clarity on cryptocurrency has made it fertile ground for fraudulent actors. However, courts and law enforcement agencies have adapted existing legal frameworks to prosecute crypto frauds. With the increasing scrutiny by ED, SEBI, and state police cyber cells, more of these cases are being exposed.
Thereโs a pressing need for:
A dedicated crypto regulation law
Investor awareness
Stricter KYC/AML norms on Indian exchanges
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