Four individuals have been arrested in India in connection to a $14 million cryptocurrency scam that involved the promotion of ‘KBC Coin.’
KBC Coin Fraud
A report from the Times of India indicates that four men were arrested in the west Indian city of Surat after being tied to a scam that defrauded victims of $14.2 million. The report indicates that the actual amount stolen was “likely” much higher than $14 million and represented the sixth cryptocurrency-related fraud registered in Surat over the last two years.
The alleged perpetrators were promoters of ‘KBC Coin,’ a cryptocurrency that was supposed to be backed by gold. One of the individuals involved in the scam, Baljeetsingh Lashkariya, who is currently on the run from the police, first hatched the scheme two years ago in an advertisement for KBC’s network.
KBC Coin held its launch six months ago after enticing “thousands” of investors on the false promise of a gold-backed token. Each KBC was being sold for 10 paise ($0.01), with the promoters claiming that the currency would grow one-hundred fold in a short amount of time.
Director general of police (DGP) Ashish Bhatia said that the accused falsely promised investors returns they were never able to deliver. Instead, they vanished from the project altogether.
According to Bhatia,
“The value of KBC coins never increased and within six months, the promoters went underground.”
Lashkariya, who appears to be the mastermind of the scheme, never obtained the necessary permission from the Reserve Bank of India (RBI) to sell his currency. Instead, he relied upon a network of promoters across several branch locations to lure investors before defrauding them of funds in exchange for worthless tokens.
Crypto Pyramid Scheme
Similar to other crypto-related scams, the entire operation functioned as a pyramid scheme.
A CID official commented,
“The first investor in the chain get an incentive from the last circle of investors. This offer played a major role in bringing more investors to the company.”
The Times of India speculates that Surat has become a hotbed for cryptocurrency and crypto-related schemes since the 2016 Indian banknote demonetization, which required companies dealing in cash to find alternative sources to park their funds.
Demand for crypto-assets skyrocketed following the demonetization, which was a government policy aimed at curbing India’s shadow economy and counterfeit cash market. Instead, crypto fraudsters have taken advantage of the situation by floating their own coins.