August 11, 2018

Gujarat’s bitcoin-based Ponzi scheme could lead to India’s largest banking scandal

A $3 billion scam could be unfolding in Gujarat as probe into an alleged Ponzi scheme reveals tax evasion, police corruption and a fugitive politician.

Accusations of tax evasion and police corruption, a kidnapper who was kidnapped, a fugitive politician, and billions in bitcoin lost. This is crypto-trading Gujarat-style.

The ingredients are part of an investigation in Prime Minister Narendra Modi’s home state into allegations that investors poured cash into a bitcoin-based Ponzi scheme that could exceed the country’s largest banking scandal. The fallout extends as far as Texas and has embroiled a former lawmaker, tarnishing Modi’s ruling party months before an election.

It began in February, when property developer Shailesh Bhatt charged into the Home Minister’s office in Modi’s home state of Gujarat, claiming he had been kidnapped by a group of policemen and told to pay 200 bitcoin, worth some $1.8 million at the time, for his release. He said he had nowhere else to go.

The state’s elite Criminal Investigation Department was called in and the evidence it has uncovered points to a potential fraud on an epic scale. Eight policemen have been indicted and suspended pending trial. The abduction was allegedly spearheaded by Bhatt’s associate, Kirit Paladiya, and masterminded by Paladiya’s uncle Nalin Kotadiya, a former lawmaker in Modi’s ruling Bharatiya Janata Party, according to Ashish Bhatia, the lead CID investigator. Bhatt has been charged too, as the allegations of kidnapping widened.

Paladiya is now in jail, facing charges of abduction and extortion, and Bhatt and Kotadiya are both absconding, according to police. Kotadiya posted a video via Whatsapp in April denying wrongdoing and saying he’d informed authorities about the crypto scam, said Prashant Dayal, a senior Gujarati journalist who broke the story.

In the video, reposted on Youtube, Kotadiya says Bhatt is responsible for the scam and threatens to release evidence that could implicate other politicians. Both Bhatt and Paladiya have denied wrongdoing, according to their lawyers.

Between late 2016 and early 2017, Bhatt invested in BitConnect, a cryptocurrency firm that was being promoted in Gujarat by a man called Satish Kumbhani, according to Bhatia, the CID investigator, in an interview at his office late June.

Kumbhani is one of the founders of BitConnect, which has allegedly scammed individuals across the globe, according to Crypto Watchdogs, a group of six investors who’ve filed a U.S. federal lawsuit against the company. The firm recruited clients worldwide to deposit bitcoin and receive BitConnect coins they could lend ...

Read more at https://theprint.in/economy/gujarats-bitcoin-based-ponzi-scheme-could-lead-to-indias-largest-banking-scandal/96241/

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