Many falling victim to cryptocurrency scams

As regulations elude cryptocurrency market, players feel trading in virtual currency had become akin to playing with fire and had made them vulnerable to scams and ponzi schemes.

Many serious players in the market, who spoke to DNA Money anonymously, said a lot of people had lost their entire investment as they dabbled in cryptocurrency trading.

With the government and the regulatory authority taking a stand that cryptocurrencies were not legal, there was little hope for traders of recovery of their money, they said.

"They (traders) are vulnerable. What happened before the stock market was regularised is happening now. People are forming fake companies and selling bitcoins and other cryptocurrencies, which have no value. There is no way people can get their money back once the website is shut down," said one of the industry insiders.

According to him, some people tried to lodge a police complaint but could not succeed. "People are trying to file complaints but police are not seeing it as a crime. People, who have the source with the police, can only file an FIR (first information report). They (police) are not interested in solving these kinds of issues," he said.

Another industry insider, who did not want to be named, said cryptocurrency had become riskier after the recent Reserve Bank of India (RBI) circular directing all banks to withdraw their services to virtual currency exchanges.

"These exchanges are playing with their customer's greed and fear. First, they (exchanges) jacked up the cryptocurrency prices when it was doing very well in late 2017. Many traders entered the market then. The downturn in the market and the recent RBI circular have heightened their clients' fear. Gauging the fear, these exchanges are compelling traders to sell at a very low price. Once the customers exit at throwaway prices, these exchanges are making huge profits by selling the digital currency in the global market at more than 10 times the rate. Some of them are even shutting down," he said.

He claimed that traders on buybitcoin.org.in may have been victims of a scam as the exchange has "stopped operations".

DNA Money visited the buybitcoin.org.in website. It said; "we have stopped our operation. Please reach out to support@buybitcoin.org.in for any help".

Delhi-based BuyBitcoin.org.in was reportedly a new exchange, which was launched early this year. Its parent company is reportedly registered as Ansals Software Private Limited.

"BuyBitcoin.org.in shut down its operation very recently. It was 2-3 weeks back. After the RBI mandate came, they stopped withdrawals and all operations. More than Rs1 crore of people's money was stuck in their wallet. People wanted to withdraw money from them but they (BuyBitcoin.org.in) were not giving. They were just fooling people that banks have stopped giving services to them," he said.

According to him, BuyBitcoin.org.in was founded by customers of Bitcoin-India.org. Apparently, investments of traders on the latter's exchange had also gone sour.

A little probe by DNA Money by visiting the Facebook page of Bitcoin-India.org revealed there were many disgruntled customers.

One of the traders Tirumalesh Malla wrote, "just a scam site, please stay away from this site and don't waste your hard earned money here. Pathetic customer support, so arrogant people, they will never care about your money. Once you deposit any cryptocurrency you are caught up, they will not allow you to withdraw and just say that their systems are under maintenance, even for weeks and months. How can they accept currency deposits when they cannot allow to withdraw? This itself shows it's a big scam".

Another trader Aman Sethi said he began trading on Bitcoin-India.org "in the first week of October 2017" and lost $19500 (around Rs13 lakh at today's rate) by the end of November 2017.

"At first they disabled my account and after enabling my account they stole all my balance and made it Zero. I am still fighting with them to get my balance back but I am losing hope day by day as the only customer care support they have is through e-mail and it has been 5 days today that I have not received any reply from them. The worst mistake of my life that I put all my hard earned money to trade in Bitcoin trusting that this exchange will not cheat on me but they did," says Sethi's post on the Bitcoin-India.org's Facebook page.

There are many such comments on Bitcoin-India.org's Facebook page.

Sathvik Vishwanath, co-founder of Unocoin, said the cryptocurrency market will find its way out of all this and succeed. "It will take time for people for figure out. I don't really know what but I am sure solution will start popping up," he said.

Sudin Baraokar, information technology (IT) & innovation advisor to banks and one of the members on finance ministry's panel for blockchain technology and digital fiat currency, said the government has been very clear in its communication that "cryptocurrencies were not welcome here (India)." "There are a lot of people who have seen (been aware of) the risk and invested. They knew there is nothing to regulate it (cryptocurrency). That's the mistake they made," said Baraokar.

He advised people to stay away from investment in cryptocurrencies till it was made legal. "It's better to stay away till the authorities say it is legal otherwise I don't know whether these guys (traders) have a proof that they have been given that bitcoin/cryptocurrency. It could be a scam," warned the virtual currency expert.

Baraokar said it was still premature to implement regulations for cryptocurrency in India. "My personal view is that in India many people don't even have enough of fiat currency and you expect the authority to implement cryptocurrency. I don't know how it will affect the mainstream society. There is enough work to be done on fiat currency and digital payments and financial inclusion. And yes, these people knew it was a scam all along and I think they have to pay a price for it," he said.

Baraokar said Indian authorities have all along been very sure that "cryptocurrencies and bitcoins are not legal".

"In my view, everybody was warned (about cryptocurrencies). It's now too late to say we were not warned and we have done this".

NO VIRTUAL HIT

• Unsuspecting bitcoin and other virtual currency enthusiasts are falling into trap
   
• They have no escape option in the absence of regulation
   
• Authorities say govt has always maintained cryptocurrencies were not legal