Elaborate Indian Bitcoin Scam Involves Policemen, Lawmakers

Bitcoin Daily

Gujarat, the Indian home state of Prime Minister Narendra Modi, is at the center of a bitcoin-based Ponzi scheme that could end up being the biggest banking scandal the country has seen.

According to a report in Bloomberg, the Ponzi scheme reportedly began in February when property developer Shailesh Bhatt claimed he had been kidnapped by policemen and told to pay 200 bitcoin, which was valued at $1.8 million at the time. He escaped to the Home Minister’s office, saying he had nowhere to go. That resulted in a call to the Criminal Investigation Department and an investigation uncovering the potential fraud.

Bloomberg said eight policemen have been indicted and suspended while they face trial. The kidnapping is allegedly the work of Kirit Paladiya, an associated of Bhatt, and masterminded by Paladiya’s uncle Nalin Kotadiya, a former lawmaker in Modi’s ruling Bharatiya Janata Party. Bhatt has also been charged, noted the report.

The report said Paladiya is in jail while Bhatt and Kotadiya are both absconding, according to police. In a WhatsApp video in April, Bloomberg reported, Kotadiya said he was innocent and alerted authorities to the scam. He also said Bhatt is the one behind the scam and said he will release evidence that shows other politicians were involved. Both Bhatt and Paladiya have denied wrongdoing, according to their lawyers.

Bhatt had invested in BitConnect, a digital token, from late 2016 through early 2017. With the price surging, Bhatt and other investors in Gujarat invested $3.2 billion into BitConnect.

Once the price of BitConnect started to crash (when the state of Texas filed a cease and desist order against BitConnect), the investor  including Bhatt — devised a scheme to kidnap two BitConnect representatives in Surat and demand 2,256 bitcoin as ransom. Paladiya reportedly wanted more and double-crossed Bhatt. They bet that Bhatt wouldn’t go to the authorities, investigators told Bloomberg. However, Bhatt decided to press charges instead, and that sparked the inquiry.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.