The Bitcoin scam unravelling in Surat began with a letter. Shailesh Bhatt, a builder based in the diamond city, wrote to Gujarat’s junior Home Minister Pradeepsinh Jadeja in February, alleging that Amreli Police had extorted bitcoins worth ₹12 crore from him. Mr. Jadeja forwarded the complaint to the Crime Investigation Department (CID). A probe led to the opening of a Pandora's Box.
“While probing the case, we learnt that Bhatt himself was an extortionist. He had extorted bitcoins worth ₹155.21 crore from others before he was kidnapped [for extortion] by the Amreli Police,” CID (Crime) Director General of Police (DGP) Ashish Bhatia told reporters on May 21.
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The agency has registered a new case to book Bhatt and others, including Superintendent of Police (SP) Jagdish Patel and Police Inspector Anant Patel. Former Bharatiya Janata Party (BJP) legislator Nalin Kotadia, currently absconding, is also an accused in the case.
The CID’s probe revealed that, about two years ago, one Satish Kumbhani floated the ‘Bit Connect Investment Company’ and lured people like Bhatt to invest in it. Huge returns of 1%-4% per day were promised. Bhatt invested ₹2 crore in the enterprise. In December 2017, its promoters downed the shutters and went underground.
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To recover his investment, Bhatt’s accomplices posed as Income Tax officials and kidnapped Piyush Savalia, who had worked with Bit Connect, on January 30, 2018. He was kept in a farmhouse at gunpoint and released two days later, on February 1. “On the morning of February 1, Bhatt’s men kidnapped Dhaval Mavani, another person associated with the company, and released him late on the same night. Mavani was forced to transfer 2,256 bitcoins worth ₹131 crore into their account. The builder and his accomplices had also transferred another 166 bitcoins worth ₹9.64 crore into their account,” Mr. Bhatia said, adding, “When we started a probe directed at Bhatt, he even paid ₹ 34.5 lakh to Piyush Savalia as hush money to keep him quiet.”
The former legislator, who played a fixer between Bhatt and the Amreli Police when the police extorted ₹12 crore bitcoins from Bhatt, allegedly received ₹60 lakh, of which the CID has recovered ₹20 lakh transacted through havala.
Mr. Bhatia estimates that the Bitcoin extortion racket is set to get bigger as more people who invested in the hope of making a quick buck became victims of organised crime. “So far, we have only caught two cases involving ₹167 crore,” Mr. Bhatia said. “We are investigating seven companies with investments in virtual currencies in which businessmen parked their illicit cash after demonetisation.”
A senior official in Gujarat who declined to be named said, “It’s an open secret that people having a high volume of cash at the time of demonetisation converted their black money into crypto currencies with the help of havala operators.” Officials involved in the Bitcoin probe estimate that approximately ₹5,000 crore cash was converted into cryptocurrencies in Surat after demonetisation.