Crypto Rug-Pulls Affect Thousands of Users in Himachal Pradesh, Over Rs 200 Crore Lost

The fraudsters used a combination of misinformation, deception, and threats to maintain control over their scheme.

By Press Trust of India | Updated: 3 October 2023 12:00 IST

Crypto Rug-Pulls Affect Thousands of Users in Himachal Pradesh, Over Rs 200 Crore Lost

Photo Credit: Unsplash/ Bermix Studio

An initial activation fee was charged to buyers who were promised substantial returns

Highlights

Crypto rug-pull scams have affected thousands in Himachal Pradesh
The fraudsters have reportedly collected Rs. 200 crore over five years
Multiple crypto coins were minted by the fraudsters as part of the scam

Fraudsters in Himachal Pradesh minted a series of a crypto coins — two of which were KRO and DGT — to cheat thousands of investors of more than Rs 200 crore over a period of five years, beginning in 2018 — the year that crypto reached fever pitch.

The persons alleged to be part of a gang lured people promising them high returns in a short span of time in crypto investments and created a network of investors.

The initial investors then were baited to reel in other people in a Ponzi-style scheme.

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The matter was raised in the Vidhan Sabha by Independent MLA Hoshyar Singh who pegged the amount of money swindled from people in Kangra and Hamirpur alone to be upwards of Rs. 200 crore.

In the wake of Singh's assembly speech, a special investigation team was formed to probe into the matter.

The exact amount defrauded is yet to be ascertained, Deputy Inspector General of Police, Northern Range, Abhishek Dhullar, who is heading the SIT, told PTI on Monday.

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Five people have been arrested in the connection with the frauds, however, their kingpin is still at large, police said.

The frauds used a combination of misinformation, deception, and threats to maintain control over their scheme and continued to extract money from unsuspecting investors by manipulating the prices of their coins, he said.

The first coin they launched was 'Korvio Coin' or KRO coins.

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They charged the buyers an initial activation fee and promised them substantial returns. In their five-year-run, the frauds used three to four cryptocurrencies.

Cryptocurrency is a digital currency designed to work as a medium of exchange through a blockchain-based computer network that is not dependent on any central authority, such as the government or bank to uphold or maintain it.

Once their accounts were activated, the investors were encouraged to rope in more members into the scheme, police said.

The criminals used a Ponzi scheme pattern — a type of investment scam in which returns are paid to earlier investors from the capital contributed by new investors rather than from any legitimate profits.

Investors were encouraged to keep recruiting new members, a practice which created a cycle where money from new investments was used to pay returns to earlier investors. These initial investors got huge returns and became brand ambassadors of the scheme.

The scammers built fake websites to list their coins and manipulated their prices.

They later launched a new coin called 'DGT Coin.' After enough people had purchased these coins at a higher rate, its price was deliberately brought down causing a massive rugpull.

The accused introduced new coins and investment plans under different company names, such as 'Hypenext' and 'Aglobal.' Each time a new coin was introduced, it was marketed as a yet another investment opportunity, police said.

According to police, they have received 50 complaints about such frauds this year alone.

During their investigation, police found that the modus operandi across these frauds was similar and names involved common, SP Cyber Crime Rohit Malpani said.

Since then, five people have been arrested and chargesheeted in connection with these frauds and eight FIRs filed, police said.

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

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

Cryptocurrency market has seen several rug-pulls in the past few years, including the famous 2021 Squid coin scam in which the coin makers reportedly made off with $23 million (roughly Rs. 190 crore).

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