India crypto fraud: Himachal Pradesh investors lose $24mn in a series of 'rug-pulls'

Fraudsters in the north Indian state of Himachal Pradesh allegedly defrauded multiple crypto investors of more than $24 million(Rs 200 crore) over five years, beginning in 2018. This period was marked by the rise in investor interest in cryptocurrencies.

The suspects, thought to be part of a criminal syndicate, enticed individuals with promises of high returns within a short timeframe by encouraging investments in KRO and DGT coins. They adopted a Ponzi-style scheme, luring initial investors to engage more investors to recruit others into the scheme.

The matter was brought to light in the state legislature, or Vidhan Sabha, by independent legislator Hoshyar Singh, estimating the amount swindled in Kangra and Hamirpur alone to be over $24 million(Rs 200 crore), as reported by PTI.

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The exact amount of the fraud is yet to be ascertained, said Deputy Inspector General of Police, Northern Range, Abhishek Dhullar, who heads the SIT, said on Monday (Oct 2).

So far, five people have been apprehended in connection with the fraud, but the mastermind is still at large, police said.

The frauds kept control of their operation using a combination of misinformation, deception, and threats to maintain control over their scheme and continued extorting money from unsuspecting investors by manipulating the prices of their coins, Dhullar added.

The first coin they released was the "Korvio Coin," also known as KRO coins.

They demanded a one-time activation fee from the buyers and guaranteed them high returns. The scammers employed three to four cryptocurrencies over five years.

What is cryptocurrency?

Cryptocurrency is a type of digital money that operates as a means of exchange through a blockchain-based computer network and is not supported or maintained by any central authority, such as a bank or government.

Modus operandi

A Ponzi scheme is a specific kind of investment fraud in which returns are given to previous investors using the money that new investors have supplied rather than actual gains.

In Himachal, the fraudstersencouraged investors to keep recruiting new members, which created a cycle where money from new investments was used to pay returns to earlier investors and these initial investors got huge returns and became brand ambassadors of the scheme.

In order to list their coins and influence their pricing, the scammers also created bogus websites.

Investigation so far

"We are close to nabbing the kingpins of cryptocurrency scams in Himachal Pradesh and have mapped their assets and are conducting a financial investigation," Director General of Police Sanjay Kundu told PTI.

"My advice to people is not to fall prey to the cryptocurrency fraudsters," he added.

In recent years, there have been several scams involving cryptocurrencies, including the well-known 2021 Squid coin hoax, in which the coin's creators allegedly made off with $23 million.

(With inputs from agencies)