~By Sujit Bhar
The fabled cryptocurrency Bitcoin (BTC), enigmatic as it is, has generated a sea of scams in India, through misuse of the Multi Level Marketing (MLM) method. In a recent expose, now being investigated by the CID in Gujarat, it has been said that the overall scam is to the tune of Rs 88,000 crore. It is also being said that most of that money was routed through a website called Bitconnect.com (as well as an associate recruiting website called www.zewanghelp.com), launched around the time of demonetisation. Having eaten up the cash with promises of delivery,…
India Legal unravels the players and methodology behind an elaborate scam in Gujarat where Rs 88,000 crores was siphoned off from gullible investors. The scam is now being investigated by the Gujarat CID, but our investigation details how the promoters fled abroad, except for one key conspirator who was tracked down and interviewed
~By Sujit Bhar
The fabled cryptocurrency Bitcoin (BTC), enigmatic as it is, has generated a sea of scams in India, through misuse of the Multi Level Marketing (MLM) method. In a recent expose, now being investigated by the CID in Gujarat, it has been said that the overall scam is to the tune of Rs 88,000 crore. It is also being said that most of that money was routed through a website called Bitconnect.com (as well as an associate recruiting website called www.zewanghelp.com), launched around the time of demonetisation. Having eaten up the cash with promises of delivery, the promoters quickly shut shop and vanished from the country. Massive chunks of illicit cash (intended to be laundered) vanished into the deep hole and into BTC wallets that are now owned by the promoters.
Investigation is ongoing and just the other day, former BJP MLA Nalin Kotadiya was declared an economic absconder in the case. Senior police officers, including an SP, along with a real estate mafia boss have been arrested and the can of worms opened will engulf even more in the coming days.
In this midst, India Legal has uncovered a scamster who had not only been part of the original Bitconnect scamsters—Mahendra Chaudhari, Divyesh Darji and Satish Kumbhani—but had the gall to scam his partners in crime as well. Not only that, while his partners had to flee the country to escape the law, this super scamster, Sita Ram Gurjar, is happily ensconsed in Rajasthan, enjoying the fruits of his scam. He has had no FIR or even a complaint against his name and no arm of the law has any idea of the extent of his scam. The extent of the scam is close to Rs 6,000 crore, but with illicit cash invested (through hawala routes, from builders, politicians, business operations and the mafia), nobody has come forward to file a complaint.
Gurjar, also known as Sita Ram Poswal, according to a source, sold some of the BTC (the price of the BTC had shot up at that time) and opened a restaurant in the four-star, 28-storey Majestic Hotel in Bur Dubai, near Burj Khalifa. His restaurant is called Bar Baar and has a high rating among expat Indians and even local residents. Gurjar’s (Poswal’s) ownership of the restaurant has been confirmed by India Legal.
The entire operation of Bitconnect was carried out as a Ponzi scheme, with promised paybacks ranging from 1 to 4 percent per month. This meant that an investment would not only be more than recovered in a year, it could launder incredible amounts of cash through a technical glitch in the Indian legal system. Bitcoins and other cryptocurrencies are not controlled by the Indian government or the RBI. While the RBI has issued a cautionary note about dealing in cryptocurrencies, the government has neither made them legal nor notified it as illegal. At their peak, Bitconnect was doing so much business that the promoters sometimes raked in as much as Rs 200 crore per day. The average was Rs 2 crore per day.
While working hand-in-glove with Kumbhani, Chaudhary and Darji, Gurjar became even more ambitious and started his own business of duping investors, though his operations were more covert. He bought all BTC in either his own name or a co-conspirator’s name and these were never credited to the “inves-tors’” supposed wallets. When Bitconnect had its fill and folded up quickly, with the official promoters leaving the country, Gurjar, who was not associated officially, separated and avoided all contact with those he duped.
India Legal managed to track down Gurjar and called him at his Indian cell number (see full transcript) with the correspondent pretending to be another investor duped by Kumbhani & Co, through Bitconnect. While the phone call did not conclusively prove that Gurjar had duped his investors and of how much, it certainly proved that he knew Sailesh Bhatt (the builder mafia who has been arrested by the CID), Kumbhani and Co and even, to an extent, Kotadiya. He also admitted that he had set up the hugely expensive restaurant in the fancy district of Dubai. This was also double-confirmed by India Legal via a phone call to the restaurant where its manager, Anthony, confirmed that Gurjar was the “owner”.
Interestingly, Gurjar has managed to stay completely out of the huge CID dragnet. This was confirmed to India Legal by Ashis Bhatia, Additional DGP (CID Crime), Gujarat. He is the man in overall in-charge of the entire investigation. “This man (Gurjar) is certainly not with the scope of our investigation,” he said over the phone. He said he had no knowledge of who this man was. It did not ring a bell even when India Legal informed him that Gurjar had set up a high-end restaurant in Dubai just last year and his source of funds is totally unexplainable. Evidently, Gurjar has managed to stay under the radar.
When India Legal caught up with Gurjar over the phone, he was initially open about talking about the ill-effects of investing in BTC, advising this correspondent against it. “Nahi bilkul theek thaak nahi hai (Not at all right),” he said about investing. He admitted during the conversation that he knew all the decamped culprits, but when probed further, he clammed up and disconnected quickly.
The conversation clearly proves that the investigating agencies are possibly skimming only the surface of the vast scam—the Bitconnect (and associated) scams are said to be the biggest ever cryptocurrency scams of all time. Tagging people like Gurjar would unearth even more murky deals.
Amid this chaos, the original promoters are far away. According to India Legal’s sources, when they pulled the shutters down on Bitconnect in December 2017, all—Mahendra Chaudhari, Divyesh Darji and Satish Kumbhani—fled to Dubai. Later, Darji and Kumbhani moved out of Dubai, with the former off to the US and Canada, and the latter back to the US. The whereabouts of Chaudhari are not known.
The entire Bitconnect scam would never have come to light, but for the greed of a builder-mafia don called Sailesh Bhatt and some avaricious policemen. It has now been alleged that the Amareli (Saurashtra, Gujarat) police —including Superintendent of Police Jagdish Patel, sub-inspector Anant Patel and two constables—were hand in glove with Bhatt.
With the source of funds being mostly dirty cash—people were generally looking for ways and means to park and launder such cash, and with demonetisation (this scam flourished during that time) this process accelerated—Bitconnect and the police were having a gala time raking in the moolah. For this purpose, the promoters of Bitconnect developed huge connections with the underworld, not only promising them close to four percent per month return, but also a safe way of laundering their money. Quite like any Ponzi scheme, the early birds were actually able to make windfall gains, making the process look more credible, reliable and lucrative. Besides, post-demonetisation, there were few other avenues left to park so much cash. That was why, for the Bitconnect promoters, the MMM model was ideal.
Various political names are also making the rounds, apart from the absconding ex-MLA of BJP Nalin Kotadiya. When India Legal tried to contact Kotadiya over his cell phone, we found his number switched off. It is being said that he does not carry a cell phone anymore for fear of being tracked. The police have not been able to contact him either. Kotadiya had earlier agreed to cooperate but absconded thereafter. He had threatened to reveal the name of the son of a former chief minister of the state who he says was also involved in the Bitcoin racket.
Kotadiya, who twice won from Dhari, once representing the ruling BJP and then the Gujarat Parivartan Party, is said to be involved in a conspiracy to extort Bitcoins worth over Rs 9 crore. During the Patidar agitation, he had supported pro-quota stir leader Hardik Patel and his outfit Patidar Anamat Andolan Samiti (PAAS).
Cash worth Rs 25 lakh was recovered from Kotadiya’s aide by Gujarat CID (crime) officials. While the amount recovered is “modest”, officials have said that the recovery of cash “clearly establishes” Kotadiya’s role in the case. The cash was recovered from one Nanku-bhai, a resident of Rajkot, according to the investigating agency.
The Bitconnect scam was progressing at a fine pace when real estate developer (builder) and muscleman Bhatt came to know of it. He put in several crores of his own ill-gotten wealth into BTC with Bitconnect and also asked others to put in money (black). When Bitconnect shut shop, Bhatt was incensed. He, along with others, abducted Dhaval Mavani—an administrator of Bitconnect—and the company’s office boy Piyush Savaliya from Surat and extorted 2,256 Bitcoins, 11,000 lite coins and Rs 14.50 crore in cash. That was worth a total of Rs 155.21 crore. Unofficial estimates of the total are Rs 131 crore.
Bhatt is an uneducated person and does not possess a wallet, hence he saw to it that the BTC was transferred to another account.
Meanwhile, Kirat Paladiya, Bhatt’s alleged “business associate” (as Bhatt has claimed), who is a bit tech savvy, was acting as a middleman, between the police and Bhatt (that connection of the police with the underworld was an old one). And he informed the police of Bhatt’s windfall gain.
Hotline to Gurjar
India Legal tracked down Sita Ram Gurjar, a mastermind in the crypto currency Bitcoin scam and the person who did a fast one even on his former Bitconnect buddies—Mahendra Chaudhari, Divyesh Darji and Satish Kumbhani—to run his own scam worth nearly Rs 6,000 crore. India Legal confirmed Gurjar’s (also known as Poswal) business investment in Dubai, when Anthony, his manager at the Bar Baar restaurant at Majestic Hotel there confirmed that he (Poswal) was the owner. India Legal telephoned Gurjar. While the entire conversation was in Hindi, a recording of which we possesses, we are publishing mostly an English transcript
India Legal: Yes, Gurjar sahab, I’m calling from Delhi. A little while ago… hello?
G : (Noise, inaudible)
IL: Hello? Can you hear me?
G: Yes, tell me.
IL: Yes, Gurjar sahib, I’m speaking from Delhi.
G: Yes, tell me.
IL: Yes yes yes. Issue is, I had been to Dubai. There I ate at your restaurant. It was good.
G: Bar Baar. Good.
IL: Good food, the chicken one is very good. There I got your number. So I thought of calling you and find out, but coming to Delhi I got the news that you are being framed.
G: Kya jaa raha hai? (What’s happening?)
IL: You are being framed in the matter of Bitcoin. So I also wanted to see what happened in Bitcoin’s case. I thought about investing… Don’t know how your name came in, how Kumbhani sahab’s name came in. They are also speaking about Darji sahab. I heard your name too. So I got the number from there. I had only one number, so I called you. Is it okay to invest in Bitcoin?
G: Nahi bilkul theek thaak nahi hai. (No, it is not at all okay).
IL: Is it not okay?
G: Nahi hai. (No it is not).
IL: Why not? This is an international thing, Bitcoin, right?
G: Mat karo. Mat karo. (Don’t do it. Don’t do it).
IL: Why? I’m a little afraid, I gave some cash to someone already.
G: Don’t do it. That’s why I’m telling you not to invest. Carry on whatever work you do. Don’t get involved in all these matters. One lakh will be reduced to 12 thousand.
IL: Why why? I already gave my money, now what should I do?
G : Whom did you give?
IL : He said he was some relative or maybe representative of Kumbhani or Darji. I gave my money to him.
G : How many lakhs?
IL : 38 lakhs.
G : It’s gone now, what can you do.
IL: The money is gone?
G : Yes, gone. It will sink.
IL: Why, he won’t give me Bitcoin?
IL: There was a man named Shailesh Bhatt. He called me several days ago. He also said.
G: What did he say?
IL: You know him? Shailesh Bhatt? He said you do.
G: (Tone become guarded) What did Shailesh Bhatt say?
IL: Shailesh Bhatt is from Gujarat. He is a builder or something…
IL: He said put this money. He is a close friend of my builder. He said put the money in. So I did. Now, nowhere. I’m just thinking about how to get my money back. Tell me, what should I do?
G: (Noise, inaudible)
IL: I don’t even know where Kotadiya sahab (referring to former BJP MLA Nalin Kotadiya) is…
G : (Noise) He’s gone.
IL : Hello?
IL : Your voice is getting cut. I can’t hear you. Hello?
G: Yeh wrong number lagaya hai aapne. (You’ve dialed the wrong number).
IL: No how can it be the wrong number? Hello?
G: Yes. (very guarded).
IL: Yes tell me. Arrange something. My 38 lakhs is stuck.
G: I can’t understand what you’re saying.
IL: My 38 lakhs is stuck, you do something. Everyone is saying that only you can do it.
G: Yes. What are you saying?
IL: You know Kotadiya sahab, right? He’s such a big politician.
IL: Nalin Kotadiya, he was an MP—MLA?
G : (Feeble) Yes.
IL: Whatever, you know Kumbhani and Darji. Get my money from them?
IL: You know Satish Kumbhani and Divyesh Darji, right?
G : No.
IL: Shailesh Bhatt said you do. This is difficult for me now. That’s why from there…
The Amareli police—SP Jagdish Patel and SI Anant Patel—also informed Kotadiya. These two police officials and Kotadiya, then decided to get BTCs from Bhatt. They allegedly managed to have Rs 12 crore worth of BTC transferred to another account (arranged by Paladiya, because neither the police nor the ex-MLA had any account). All, including Paladiya, have been arrested by the CID.
That was not the end of the string. Joining up with the CID is the income tax department as well as the Directorate of Enforcement (ED). It was found that a Gandhinagar CBI official was also hand in glove with the culprits. Two CBI officers were flown in from Delhi thereafter, and they met Surat income tax officials who handed them files containing “explosive details”.
The IT department has, meanwhile, issued notice to 14 assessees in Surat, saying that those found to be having unaccounted investment in BTC will have to pay 66 percent tax on that amount, plus a penalty of 66 percent under FERA rules. They will also be charged under economic offence laws and that it will amount to sedition, treason and subversion.
How much of that knee-jerk reaction by the IT department will stand in court, though, is debatable.