As the Delhi police prepare to interrogate Amit Bhardwaj, the alleged mastermind of a Rs 2,000-crore Bitcoin mining scam, they fear that his sophisticated cryptocurrency racket may be just the “tip of the iceberg”. Indeed, just last week, the police claimed to have busted another virtual currency racket run by two men from Haryana and involving around 5,000 investors.

Bhardwaj, accused of duping thousands of people over three years, was arrested on April 5. He had been on the run for nearly eight months after fleeing India, prompting the Enforcement Directorate to issue a lookout notice against him. Late last year, he was found at the Dubai airport but escaped detention by feigning a heart attack and fled to Bangkok. Then early this month, Thai security agencies alerted Indian officials that Bhardwaj was travelling to Delhi. He was detained at the airport.

He is currently held by the police in Pune, where most of the complaints against him are registered. “This week, we shall move an application to the concerned court in Pune seeking custody of Bhardwaj,” said Deputy Commissioner of Police, Crime Branch, Bhisham Singh. “He has to be interrogated in connection with two separate cases registered against him in Delhi.”

Bhardwaj, 35, left his job in a major IT company to launch India’s first online retail marketplace that accepted bitcoin in 2014. The venture soon failed, the police said, and Bhardwaj founded a series of Bitcoin mining firms such as Gain Bitcoin, GB Miners and MCAP. It was through these companies that he duped investors.

Sophisticated scam

As reported in January, police in Mumbai and Delhi have busted around a dozen rackets duping people on the pretext of investing in cryptocurrencies. In most of the cases, the investors knew little about virtual currency and invested solely because they had heard about the exponential rise in the value of Bitcoin, the world’s first cryptocurrency. But the companies they invested in either mined cryptocurrencies that had no value in the virtual stock market or did not mine real cryptocurrencies at all.

Bhardwaj’s game was more sophisticated. “He knew the business,” said an architect who invested in Gain Bitcoin and asked not to be identified. “His idea was simple but technically strong. Individual Bitcoin mining would yield less rewards. So, his idea was to pool resources for collective mining of Bitcoins, generating potentially higher returns. The investment too was to be done in Bitcoins and the return was supposed to come in Bitcoins, at a rate of 10% per year for 18 months. But the returns never came.”

Bhardwaj has, in fact, written three books on cryptocurrencies and his work has been endorsed by celebrities and industry lobbies such as Assocham, as last year’s exposé of his schemes by the Caravan magazine pointed out.

Unlike most other cryptocurrency rackets whose victims did not know much about the virtual currency ecosystem, Bhardwaj’s targets ranged from regular cryptocurrency investors and IT workers to corporate executives and political leaders, the police said.

“While the initial idea was that of collective investment for Bitcoin mining, Bhardwaj later started more companies operating on a multi-level marketing scheme,” said another investor, a postgraduate student. “This made the initial set of investors suspicious. The new investors, whom he roped in through old investors, needed no technical idea of how cryptocurrencies worked. They were told their money would be invested in Bitcoin and they would be paid back in cash. But that did not happen.”

Multi-level marketing is the strategy of businesses enterprises paying their agents or investors to recruit new agents or investors. The payment is usually a share of the business the new clients bring in.

By early 2017, Bhardwaj had floated cryptocurrencies of his own and was getting people to invest in them rather than collective Bitcoin mining, the police said. But his cryptocurrencies failed to pick up value in the virtual stock markets as promised and the investors grew agitated, with many of them filing police complaints in Pune and Delhi.

Bhardwaj’s scam, the Delhi police worry, could be the tip of the sophisticated cryptocurrency rackets targeting Indian investors. The Crime Branch has now formed a special team to look into such matters, Bhisham Singh said.