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This article was published on August 20, 2018

Arrested BitConnect kingpin is connected to yet another cryptocurrency scam

Something is cooking up in the Indian state of Gujarat

Arrested BitConnect kingpin is connected to yet another cryptocurrency scam
Neer Varshney
Story by

Neer Varshney

Former TNW writer

Nearly eight months after BitConnect pulled one of the most iconic exit scams in cryptocurrency history, the authorities across the globe are still catching up with the crooks behind the pyramid scheme.

The Indian police arrested Divyesh Darji, the alleged Asia head of BitConnect, on Saturday, local publication DNA India reports. Darji was travelling from Dubai to Delhi, when he was nabbed at the Airport by Gujarat Criminal Investigation Department (CID) officers, with the help of the immigration department.

With the last cryptocurrency exchange that still trades BitConnect now discontinuing it, and this crackdown of authorities against BitConnect architects, it does seem that BitConnect is breathing its last. But it’s not his BitConnect connection that makes Darji’s arrest interesting, it’s his connection to other suspected cryptocurrency scams in India.

BitConnect’s launch coincided with the demonetization scheme of the Indian government, where it unrecognized the larger denominations (bank notes of 500 and 1000 Indian Rupees) of the nation’s currency in an attempt to crack down on corruption and illicit money flowing in the country.

Darji, along with his companions Mahendra Chaudhari and Satish Kumbhani, are accused of siphoning $12.6 billion (880 billion Indian Rupees) from unsuspecting investors in India in the period following demonetization. Interestingly, not many of these duped investors have come forward to complain against BitConnect. Things are put in perspective when you do consider the one person that did come forward.

Shailesh Bhatt, a businessman based out of Surat in the Indian state of Gujarat, filed a complaint in April this year against 11 people, including eight policemen, for abducting him and extorting 200 BTC out of him. Further investigation in Bhatt’s case have opened a pandora’s box about multiple cryptocurrency scams taking place in Gujarat.

It turned out that Bhatt, who was initially taken to be a victim, is himself a financial fraudster. He had invested in BitConnect, but ended up losing his money when the company shut down its business in January. To compensate, Bhatt had multiple BitConnect employees abducted and had them transfer 2,400 BTC to his wallet. In turn, Kumbhani (one of the leaders of BitConnect in India) had Bhatt abducted with the help of policemen. In fact, it was the revelations in this case that led the Gujarat police to the Indian leadership of BitConnect.

Considering the case of Bhatt, it’s no wonder that not many victims of BitConnect have come forward. The allegations around cryptocurrency scams in Gujarat (and Surat in particular) run deeper than a few individuals. Gujarat’s (and India’s) ruling political party, the Bharatiya Janata Party (BJP), has also been accused of being involved in these scams with BitConnect and Shailesh Bhatt by the opposition party, the Indian National Congress (INC). As per INC’s estimates, BJP might have swindled money anywhere between $726 million to $12.78 billion in cryptocurrencies.

Political parties have a habit of making unfounded remarks about each other, and it’s important to take INC’s accusations with a pinch of salt. But, investigating authorities in Gujarat have established the involvement of at least a few members of legislative assembly (MLA) of Gujarat in these scams. One of the accused MLAs is currently on the run.

With so many stories coming at different times tying in together to Gujarat (and most of them particularly to Surat), it’s not hasty to conclude that all of this could be pointing to a single larger scam going on in the state than multiple individual scams.

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