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  1. Now Bitcoin under SEBI lens, beware of ponzi schemes in cryptocurrency

Now Bitcoin under SEBI lens, beware of ponzi schemes in cryptocurrency

Modelled on the Initial Public Offers or IPOs for issuance of new shares in the stock market, some entities have begun resorting to ICOs to raise funds from investors, including HNIs and other individuals, who are getting lured into claims of huge returns from bitcoins.

By: | Published: December 18, 2017 10:20 AM
Sebi has planned to come down heavily on illicit ‘initial coin offers.’

As the popular virtual currency Bitcoin is touching new highs every other day, investors are taking to it in a big way. However, in absence of any regulatory regime in India, illicit financial schemes seeking public investments in return of attractive returns are mushrooming in various parts of the country. In the latest, market watchdog Sebi has planned to come down heavily on illicit ‘initial coin offers.’ However, Sebi is not keen to take on the mantle of a regulator for such ‘trading’ — currently being offered on a number of so-called exchanges despite there being no rules in this regard — as the underlying product, which is Bitcoin or any such cryptocurrency, is not an approved product by RBI or any other agency, top officials told PTI. At the same time, Sebi cannot allow gullible investors to be taken for a ride with unlawful promises by these exchanges and those claiming to ‘mint’ cryptocurrencies. A number of them are suspected to be indulging in fraudulent activities without actually minting any such virtual currencies that require very complex algorithms, the officials noted. A number of ‘coin offerings’ being made in India are nothing but fraudulent Ponzi or pyramid schemes, including some offering secondary trading in Bitcoins or other established virtual currencies, while many others are plain frauds without any such currency actually being in play, they added.

Modelled on the Initial Public Offers or IPOs for issuance of new shares in the stock market, some entities have begun resorting to ICOs to raise funds from investors, including HNIs and other individuals, who are getting lured into claims of huge returns from bitcoins and other such variants — apparently getting minted in the digital world but also reaching the real world including as wedding gifts. The Income Tax Department last Tuesday conducted survey operations at major Bitcoin exchanges across the country on suspicion of alleged tax evasion even as Bitcoin has been touching new highs fuelling investor interest. Various teams of the sleuths of the department under the command of the Bengaluru investigation wing, today visited the premises of nine such exchanges in the country including in Delhi, Bengaluru, Hyderabad, Kochi and Gurugram, since early morning. The survey, under section 133A of the Income Tax Act, was conducted for “gathering evidence for establishing the identity of investors and traders, transaction undertaken by them, identity of counterparties, related bank accounts used, among others,” they said.

Bitcoin, a virtual currency, is not regulated in the country and its circulation has been a cause of concern among central bankers the world over for quite a while now. The Reserve Bank of India has also cautioned users, holders and traders of virtual currencies, including bitcoins. In March, the Union finance ministry had constituted an Inter-Disciplinary Committee to take stock of the present status of VCs both in India and globally and suggest measures for dealing with such currencies.

Earlier this month, the Reserve Bank had warned the public of the risks of virtual currencies (VCs). Citing its earlier warnings on the subject, the central bank said, “in the wake of a significant spurt in the valuation of many VCs and rapid growth in Initial Coin Offerings (ICOs), RBI reiterates the concerns”. It can be noted that the price of a single Bitcoin, which is not regulated by any monetary authority, had skyrocketed to up to USD 11,000 last week in a rally which puzzled watchers. “There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value,” the central bank had said in a December 24, 2013, note. Bitcoins or other VCs do not yet have a wide acceptance as tender for settling trade transactions. They are minted using algorithms which are based on blockchain technologies, according to experts. Those backing the instrument say no one has been able to crack the code which mints the currency and stress the fact that such instruments are the future of finance in an inter-connected world.

With PTI inputs

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  1. V
    Vipul
    Dec 18, 2017 at 1:19 pm
    Amit Bharadwaj is one the bas rd who took our money by giving us fake contracts and run away to singapore and then to dubai. His so called GAINBITCOIN firm duped thousands of corers on Indian people. if you guys can do anything on it. please do help us to bring back that fuc ing as hole.
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