India Bitconnect Head Arrested
Alleged India Bitconnect head, Divyesh Darji, was arrested this week at a airport in Delhi as he arrived from Dubai. He and conspirators are accused of bilking millions of dollars (Rs 88,000 crore) from Indian investors seeking to find financial refuge during the government’s demonetization campaign.
The sad and at times infuriating case of Bitconnect continues to unravel around the world. This week, accused mastermind of the group in Asia, Divyesh Darji, was arrested in connection with his role in the many millions of dollars investment scam.
Local media report Mr. Darji’s outfit was registered in the United Kingdom but essentially operated from the Burj Khalifa tower in Dubai. Perhaps it is a fitting center for a Bitconnect operation. The tallest structure in the world since its crowning in 2010, it mirrors proponents of the famed project and now widely recognized scam, big. Everything about Bitconnect was big: big promises, big returns, big gains, big conferences, and, alas, a very big fall.
In seemingly desperate times, human psychology might tend to succumb more readily to a kind of credulity not normally envisaged. That well-worn skepticism, when it comes to too good to be true claims, dulls when arguably needed most. Theoretically, that’s what happened to many Indian investors. In late 2016, its government demonetized all ₹500 and ₹1000 notes of the Mahatma Gandhi series. It would be the US equivalent of banning $10 and $20 bills.
It was an effort to strangle the growing Indian black market, which the government claimed was funding illicit activity and terrorism. But the rollout was sudden, immediate, and typically hamfisted.
Cash shortages exacerbated, and an already limping along economy hiccuped mightily. At Prime Minister Narendra Modi’s announcement, stock indices threatened double digit drops, the aforementioned shortages, and bank runs characterized very real national panic.
Bitconnect and scams like it were a perfect storm. Why keep money in fiat, in government paper when its publisher can just decide to snatch wealth from the average Indian on a whim. Instead catch this Bitcoin train so much in the media, with Bitconnect promising forever returns as it supposedly used invested bitcoin to pay for still other Bitcoiners’ returns.
And it worked. It did. As long as the market continued to shoot up and defy even the most irrational bitcoin proponent in late 2017, Bitconnect’s claims were vigorously defended by participants. Once so much as a small correction reared its head, however, the entire scheme collapsed. Indian promoters largely bailed, going abroad after investigations were launched by Indian authorities. Well known personalities and politicians were even caught up. Satish Kumbhani, Dhavl Mavani, and Suresh Gorasiya are some of the conspirators mentioned as well.
P G Narwade of Criminal Investigation Department (CID-Crime) of Gujarat police explained, “Darji was living in Dubai. A look-out circular was issued against him. The Immigration Department alerted us when he was on the way from Dubai to Ahmedabad, after which he was arrested today evening. The company came into existence in 2016, and in 2017, it launched the Bitconnect coin. It remained active till January this year. It released 2.80 crore coins, out of which 1.80 crore coins were sold to investors. The accused held seminars, events in India and other countries promising high interest — daily interest rate of 1 per cent — on investment in Bitconnect coins. The cost of one Bitconnect coin on January 16, 2018, when the company shut down, was USD 362.”
DGP Ashish Bhatia of CID crime noted, “The company was registered in the UK and had an office in Surat. They launched their own ‘bitconnect coins’ soon after demonetization. They promoted the company on social media and by holding gala functions in cities across the world. They lured investors with 60% monthly interest, and incentives in the form of ‘referral interest.’ This is the same company in which Shailesh Bhatt invested Rs 1.80 crore. To recover the money, he had allegedly kidnapped Dhaval Mavani and Piyush Savaliya of Bitconnect. He had extorted 2,019 bitcoins, 11,000 litecoins and Rs 14.50 crore cash. A case was then registered with the Surat zone CID crime. We recovered 169 bitcoins and 8kg of gold from the accused.”