How thousands of investors in Himachal lost crores of rupees in crypto scam
As the SIT constituted by the state police dug deeper, the scam is estimated to be worth ₹2,000 crore. The SIT is now seeking help from the Financial Intelligence Unit (FIU) of the ministry of finance and income tax department to ascertain the trail of financial transactions and the assets accumulated by the accused. It also is trying to get help from other agencies like SEBI and RBI.
Over a span of five years, starting in 2018, fraudsters operating in Himachal Pradesh reportedly scammed numerous cryptocurrency investors of ₹400 crore, initial police investigation suggested. This coincided with a surge in the crypto market. But that is just the tip of the iceberg. As the special investigation team (SIT) constituted by the state police dug deeper, the scam is estimated to be worth ₹2,000 crore. The SIT is now seeking help from the Financial Intelligence Unit (FIU) of the ministry of finance and income tax department to ascertain the trail of financial transactions and the assets accumulated by the accused. It also is trying to get help from other agencies like SEBI and RBI. HT takes a closer look.
About the scam?
The accused, two of whom are now in judicial custody, believed to be associated with an organised criminal group launched so-called cryptocurrency ‘Korvio KRO’ in 2018 and offered people the prospect of substantial returns in a brief period through investments in the digital currency. They implemented a Ponzi-style strategy, enticing initial investors to bring in more participants and encourage further recruitment into the scheme. This was a multi-level marketing (MLM) scheme which spanned across Himachal and even outside areas. The police investigation suggests that lakhs of people invested in the digital currency. Over 2.5 lakh IDs were created in Himachal alone. Many people invested through multiple IDs. While some people quit their jobs to become an agent in the scheme, others raised loans to invest in the scheme. People were lured by high returns. Five policemen, two of whom worked in the cyber cell, quit their jobs to become agents and lured many people to double their money. However, as the fraudsters expanded their network, the returns stopped. When investors asked for their money, the accused lured them to invest in other currencies promising even higher returns. While the people on the top accumulated huge wealth, those on the lower level lost everything.
How did it come to light?
The fraud came to light when Independent MLA Hoshyar Singh, who represents the Dehra assembly segment of Kangra district, raised the matter during the monsoon session of the Himachal Pradesh Vidhan Sabha in September. Replying to a question raised by Singh, deputy chief minister Mukesh Agnihotri said more than 58 complaints of cryptocurrency frauds were received across the state in two years. For a thorough probe into the scam, he announced to constitute an SIT led by a deputy inspector general-rank officer.
Who are the key players?
Subhash Sharma, a native of Sarkaghat subdivision who lived in Mandi town, is the kingpin of the racket. He managed to give the police a slip and is suspected of having been hiding in a foreign country. Another accused Abhishek is also at large but is said to be in India. Director general of police Sanjay Kundu has said that the SIT would soon arrest him. Two of the accomplices, Sukhdev and Hemraj, were arrested from a hideout in Gujarat. Hundreds of other people who worked as agents to lure investors are also under the scanner and more arrests are expected soon. So far, the police have received 55 complaints.
What is cryptocurrency? How it works?
Cryptocurrency is digital money that doesn’t require a bank or financial institution to verify transactions and can be used for purchases or as an investment. Transactions are then verified and recorded on a blockchain, an unchangeable ledger that tracks and records assets and trades.
It exists only in digital form, and although people mainly use it for online transactions, you can make some physical purchases. Unlike traditional money printed only by the government, several companies sell cryptocurrency.
Cryptocurrencies are fungible, meaning the value remains the same when bought, sold, or traded. Although government regulations are absent from the cryptocurrency market, they are taxable assets. You’ll need to file any profit or loss with the Internal Revenue Service.