Indian Police Raids Crypto Mining Operation Funded By Ponzi Scheme

Crime, News | May 9, 2018 By:

Indian police has busted a cryptocurrency mining operation based in Dehradun, the capital of the Indian state of Uttarakhand.

Delhi Police’s Cyber Cell conducted a raid on a 4,000-square-foot complex dedicated to ethereum mining and seized hundreds of high-powered computer processors, graphics cards, and servers. The raid occurred shortly after the police arrested the owners of the mine, Kamal Singh and Vijay Kumar, for an alleged cheating and fraud case.

Bits2btc.com, which was promoted by Singh and Kumar, allegedly defrauded more than 2,500 people of a collective amount of Rs 100 crores ($14.9M USD). The two accused allegedly lured victims to invest in a Ponzi scheme involving bitcoins, promising them nearly twice the amount invested within a span of three months.

“The buyers were mostly in the age group of 20-40 years and paid in cash to buy cryptocurrency from the gang,” said arresting officer KL Yadav. “We started the investigation into the complex selling network.”

Through the interrogation of Singh and Kumar, the police discovered that they had invested the cheated amount in the ethereum mining operation. Apart from bit2btc.com, they had also come up with their own cryptocurrencies, HBX and Mcap. They were also running another website called gainbitcoin.com with other associates, but with no cryptocurrencies.

“The gang frequently visited Dubai, Netherlands and other countries to learn the craft of currency mining,” Yadav said.

The police said Singh and Kumar had rented the property on which the mine was hosted since September 2017. Eight employees were hired as miners through a local computer dealer. A local was also roped in for maintaining the servers and other operations of the unit. After three months of operating, police estimate that the mining operation generated Rs 70 lakh ($105,000 USD).

The police also said that they found that a rift appeared between the partners. The suspects partner, SS Alagh, who is still at large, wanted to take full control of the operation. The rift had escalated to the point where Kumar lodged a police complaint alleging kidnapping on the part of Alagh and his associates.

“Kumar had lodged a complaint with the local police alleging that Alagh and his associates had kidnapped him,” an officer said, adding that this complaint led them to the accused.