The governments of two states in the United States namely; Illinois and Arizona have joined forces with the Criminal Investigation Department (CID) in India to confiscate the property of the promoter of BitConnect, a Bitcoin investment firm. This was recently reported by the Times of India.
BitConnect; A Ponzi Scheme?
Prior to January when BitConnect ceased operations, the platform used to be an open-source and an investment program alleged to be a Ponzi scheme, this was on the ground that the platform was hinged on a multi-level referral system coupled with empty promises to multiply returns on customer’s investment.
States of Illinois and Arizona in the US in conjunction with CID will confiscate the accused’s property. He has engaged in fraudulent practices such as raising Rs 4100 Crore (around $5.6billion) from investors. The promoter allegedly pumped most of the money to the company after demonetization of high-value banknote at the Modi government two years ago.
Darji and Crypto Fraud Allegations
Towards the end of last month, the Indian law enforcement agencies accused Divyesh Darji of allegedly promoting BitConnect and defrauding investors who invested in the initiative owing to the information by a resident of Surat City claiming that Darji Diveyesh is the head of the BitConnect in India. Also, an officer at the Indian branch in Surat had corroborated the accusation while being interrogated by the CID and agreeing that the promoter had defrauded investors of their; “crores [tens of millions] of rupees from thousands of investors.”
After discontinuing the activities of BitConnect, countless number of Americans who were victims of the schemes initiated a lawsuit against the company and requesting damages of about $771,000 from the company. The allegation in the suit is simply that the BitConnect tokens were not registered securities which imply that anything proceeding from the token was illegal from the beginning and a “crores [tens of millions] of rupees from thousands of investors.”
Investigations Regarding BitConnect Activities
There is an ongoing claim by CID that; “those who invested in this virtual currency company after demonetization are suspected of laundering black money.” The Indian authority further added that it would have a more in-depth investigation into the investors by requesting their probe from the enforcement directorate and income tax authorities.
Based on the investigation, there are other fraud schemes in the crypto ecosystem, for example, a businessman Shailesh Bhatt who reported to the CID stated that he was kidnapped and all his treasures carted away, including Rs 9 crore ($1.2 million) worth of BTC by local police, CID noted that;
“The investigation found that Bhatt had invested Rs 2 crore ($275,000) in BitConnect and after the company shut shop in January 2017, he kidnapped an employee of BitConnect, Dhaval Mavani, and extorted Bitcoins, Litecoins and cash worth Rs 155 crore ($25 million) from him.”
Cryptocurrency fraud, as well as ICO scams, are rampant in the crypto market but the peculiarity of this case is that this seems to be another dimension to crypto fraud. The collaboration by Illinois and Arizona states with the CID is indeed commendable as this could birth new era in cryptocurrency sector being a sector which is not restricted to a single country.