₹6,606 cr GainBitcoin fraud: CBI seizes crypto currency worth ₹23.94 cr

The CBI on Wednesday continued searches across several cities in the country, including Mumbai, Pune, Nanded and Kolhapur, as part of its investigation into the multi-crore Gainbitcoin cryptocurrency fraud, a Bitcoin-based multi-level marketing scheme run by Variable Tech Pte Ltd.

MUMBAI: The Central Bureau of Investigation (CBI) on Wednesday continued searches across several cities in the country, including Mumbai, Pune, Nanded and Kolhapur, as part of its investigation into the alleged multi-crore Gainbitcoin cryptocurrency fraud, a Bitcoin-based multi-level marketing scheme allegedly run by private firm, Variable Tech Pte Ltd.

A picture taken on February 6, 2018 shows a visual representation of the digital crypto-currency Bitcoin, at the "Bitcoin Change" shop in the Israeli city of Tel Aviv. / AFP PHOTO / JACK GUEZ (AFP)

The CBI seized crypto-currencies worth ₹23.94 crore along with documents and electronic devices, the contents of which are being analysed for connection to the allegations related to misappropriation of funds and international transactions in the scam.

The searches, that targeted premises linked to the accused individuals, their associates, and entities suspected of laundering money, yielded an array of articles/resources with purported evidentiary value, said CBI officials. Apart from the four cities in Maharashtra, the agency conducted coordinated searches in the National Capital Region, Chandigarh, Bengaluru, Mohali, Jhansi and Hubli, among other cities.

“Following the searches, the CBI seized significant incriminating evidence and virtual digital assets, which have further unraveled the extent of the crypto-currency fraud,” a CBI official said. “It is expected that the seized materials could give leads on the suspected misappropriation of funds and the international transactions.”

In December 2023, the Supreme Court had directed the CBI to take over the cases registered in connection with the alleged fraud. Multiple cases had been registered across the country, including in Maharashtra, Jammu and Kashmir, Punjab, Chandigarh, Delhi, West Bengal, Madhya Pradesh and Karnataka, alleging large-scale fraud and money laundering. After taking over the cases, the agency is conducting a comprehensive investigation to uncover the full extent of the fraud, identify all accused parties, and trace the misappropriated funds, including international transactions, the official said.

According to the CBI, GainBitcoin was a multi-level marketing scheme launched in 2015 by entrepreneurs Amit Bhardwaj (deceased) and Ajay Bhardwaj, and their network of agents. The scheme operated through several websites managed by a company named Variable Tech Pte Ltd. The fraudulent scheme allegedly lured investors by promising monthly returns of 10% via Bitcoin for 18 months. Potential investors were encouraged to purchase the cryptocurrency from exchanges and invest it with GainBitcoin through cloud mining contracts. The scheme’s model followed a multi-level marketing structure, which is usually linked with pyramid-structured Ponzi schemes, where payouts were dependent on attracting new investors.

Initially, the investors allegedly received the payouts in Bitcoin, but as the influx of new investments decreased by 2017, the scheme began to collapse. “In an attempt to cover up the losses, GainBitcoin unilaterally switched payouts to their alleged in-house cryptocurrency called MCAP, which had significantly less value than Bitcoin, further misleading investors, “ said the CBI official quoted earlier.

Bitcoin is a convertible virtual currency, but not a legal tender in India, and its mining refers to the method used by bitcoin and other crypto currencies to produce new coins and to examine new transactions. A crypto wallet is a software that allows access to crypto currencies.

The Enforcement Directorate’s Mumbai unit is also conducting its own money-laundering investigation into the case, in which the scam’s estimated extent is allegedly worth ₹6,606 crore (based on November 2017 figures). It’s the ED’s case that the accused collected around Rs.6, 606 crore in the form of 80,000 bitcoins.

The promoters are accused by ED of concealing the ill-gotten Bitcoins in obscure online wallets. Under the ED probe’s scanner are at least nine overseas firms including those based in Hong Kong, Dubai (United Arab Emirates) and Estonia, which were allegedly used to divert the proceeds of crime in the case.