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Cyber Net Of Crypto Criminals

Criminals are perpetually on the lookout for gullible victims—who are lax with cybersecurity—and view the crypto sector as the new golden goose

A middle-aged bullion trader on a busy street in Karol Bagh, a bustling commercial area in central Delhi, trades virtual currencies for cash. You pay him Rs 34 lakh, the prevailing rate for one Bitcoin, in cash and he will give you a code, also called a key, which you can keep anywhere in the virtual space.

A crypto coin thus obtained can be used for many purposes, such as buying a product online or making a payment to anyone anywhere in the world. “This is one of the ways how black money is being sent abroad for hawala transactions. Many individuals who trade in virtual currencies for cash operate at many places in Delhi,” Siddharth Dalmia, a lawyer who practises in the Supreme Court, says.

Though the sector is still taking roots in India, investigating agencies that track economic offences have got their hands full with complaints about crypto-related frauds. G. Nageswara Rao, additional director general of police (cyber crime), Punjab, says that though every state police has cyber cells at various level to deal with cryptocurrency-related frauds, the nodal point for the fight against cybercrimes, including virtual currencies frauds, is the Indian Cybercrime Coordination Centre, or I4C, scheme under the home ministry.


A ponzi scheme built around a cryptocurrency is the most common crypto fraud that a majority of people fall prey to. K.V.M. Prasad, additional deputy commissioner of police, cyber crime wing, Hyderabad, says that he has handled more than a dozen cases of crypto frauds and the most common among them is luring people to invest in virtual currencies for a huge profit. He says that people do not understand what virtual currencies are, so they become vulnerable to duping. “In the majority of cases, fraudsters sell Bitcoins to people, but keep keys or code with themselves. Later, they run away with it,” he says, adding “They transfer money from a victim’s virtual wallet to their own wallets without the victim’s knowledge, as the victim has authorised them to manage their virtual wealth.”

Cybercrime experts say that the investment schemes floated by fraudsters do not have any business model. They collect money from one person and pay some profit to others to gain their confidence.

One of the most infamous cases in this category is the Rs 2,000-crore cryptocurrency investment fraud unearthed in 2018. Under such a scheme, Nikunj Jain and Amit Bhardwaj allegedly allured investors to purchase 15 Bitcoins each through a banking channel, which were to become 27 in 18 months. Later on, he allegedly refused to pay the returns to investors. Investigating agencies believe that Jain and Bhardwaj cheated more 8,000 investors of cumulative sum of around Rs 2,000 crore.

Dalmia says that the virtual world and transactions are so complicated that people cannot differentiate among various virtual currencies. “I have received cases in which fraudsters have launched their own virtual currencies and sold them to people in the name of Bitcoin, because people do not know how they can identify a Bitcoin,” he says, adding “This mainly happens in Tier II and Tier III cities.”

A high-profile fraud of this nature to the tune of Rs 500 crore was carried out allegedly by Amit Lakhanpal. He launched his own virtual currency Money Trade Coin and collected money from investor. It went bust within a year of the launch.

Prasad says that there is another type of crypto-related fraud where unscrupulous elements meet potential victims in person and convince them to download a crypto application on their mobile devices. “Some people fall for the smooth talk and download the application. The victim is asked to invest, say, Rs 2 lakh in a virtual currency through this app, and in a short span of time, the app shows them that the investment getting a value of Rs 3 lakh,” he says. This sharp hike becomes a ruse for the scamster to ask the victim for a higher investment. Then, the scamster withdraws all the money from the victim’s wallet and takes off.

Sources in the investigation agencies say that investors get complacent when they invest through reputed exchanges, thinking that their money is safe. However, experts warn, crypto theft is more common than you think. An investigation officer from Ambala in Haryana says on the condition of anonymity, “I handled a case in which a youngster had filed a complaint alleging that his Bitcoin was stolen from the exchange.”

There are multiple Indian and global virtual exchanges where Indian investors buy and sell various types of cryptocurrencies. They leave their coins in their exchange wallets. Hackers are always on the prowl to exploit loose security, like weak passwords, compromised public internet, malware-infected devices, shared machines, buggy operating systems, unencrypted intranet, etc., that allow them to steal crucial crypto-related data from the investor’s devices.

Experts suggest that investor should educate themselves about corporate-level security if they deal in large volumes and want to keep cybercriminals away.