India has a huge cryptocurrency market, no doubt but some reports pointed it down as reason in surging crypto crime in the said country.
Among those problems were the dithering government, a vacationing court, and an unfriendly central bank weren’t bad enough, making India’s embattled cryptocurrency ecosystem is now staring at another problem—a spate of crimes.
The most prominent scam involving digital currencies in the country began unraveling in 2017 after investors complained against Amit Bhardwaj, founder of a cryptocurrency firm GainBitcoin.
The company had allegedly duped 8,000 investors of Rs2,000 crore ($300 million), and now British businessman Raj Kundra and other Bollywood celebrities, too, have been dragged into the mess.
In the early days, as cryptocurrencies caught on in India, frauds were limited to phishing and hacking. Then, came multi-level marketing schemes. Now virtual money is even being demanded as ransom.
Phishing and hacking: It is one of the oldest tricks in the book. An email is sent from a seemingly genuine address, asking users to click on a link and/or fill in details. These links usually contain malware that affects the systems and clones the investors data, robbing them of their funds. In other cases, a hacker may hold the important files on your system as ransom, until they are paid in cryptocurrencies.
Earlier this year, a New Delhi-based investor approached the authorities after she lost bitcoin worth Rs6.5 lakh to hacking. She lost another Rs35 lakh to crooks who promised to help retrieve the earlier amount.
Fake apps and social media accounts: Fake apps have been flooding the app stores. In other cases, counterfeit websites and Twitter handles are used to dupe gullible investors. For instance, users of Zebpay, a cryptocurrency exchange in India, received messages asking them to deposit a certain amount as part of a survey, in exchange for bitcoins. These messages were sent out from a Twitter handle that looked very similar to Zebpay’s actual account.
Ponzi schemes: The golden rule of investing is that if something looks too good to be true, it probably is. In the case of GainBitcoin, Bharadwaj had promised investors a 10% monthly return on cryptocurrency investments for 18 months under multi-level marketing (MLM) schemes such as Bitcoin Growth Fund. The MLM schemes are tiered marketing plans in which investors are rewarded for bringing more people into the fold. The old investors are paid off with the help of money ploughed in by the new customers, till the scheme falls flat.
In another case, investors in OneCoin, another company that launched a digital coin-led investment scheme, realised that the firm didn’t even have a registered office address or a bank account. Nearly, 400 people were taken in by the promise of high returns.
Meanwhile, Blockchain consultant Pramod Emjay warns that any investment offer that promises to make you rich quickly should raise a red flag. “The types of scams that are being followed are not new at all. These are just old scams in new garbs. Therefore, investor needs to follow the same rule of being very cautious.”
Exchanges under attack: In April, Coinsecure, a New Delhi-based cryptocurrency exchange, was robbed of 438 bitcoins worth Rs20 crore.
The firm named an employee in a first information report filed later that month, while promising to refund money to its investors in due time. It’s the first time that an exchange came under an attack in India. But, globally such cases are well known.