Indian Police Seize Ethereum Miners in Alleged $15 Million MLM Scheme

Indian police have raided an Ethereum mining installation with its operators allegedly running MLM schemes that raked in nearly INR 100 crores ($15 million) from investors.

The Cyber Cell unit of Delhi’s police department has reportedly raided a 4,000 square-foot complex used to mine Ethereum’s token cryptocurrency ‘ether’ after its operators were arrested on accusations of running multiple cryptocurrency-based multi-level marketing (MLM) schemes.

The two individuals behind the mining operation are alleged to have conned several victims of over ₹ 100 crores (approx. $15 million) by soliciting them to invest in gainbitcoin.com and bits2btc.com, two purported investment schemes that promised returns in bitcoin. Both websites are now defunct.

According to local media, these proceeds were used to by Ethereum and fund a steadfast operation that involved mining its token cryptocurrency.

Police from the Indian capital raided the 4,000 square-foot mining installation in Dehradun, a city north of Delhi, seizing 100 Ethereum mining rigs along with 500 graphics cards and servers.

“We had already arrested the owners of the mining firm Kamal Singh and Vijay Kumar, 13 days ago. And, based on the further intel, we have now raided their mining firm in Dehradun,” Delhi Police official KPS Malhotra told Inc42.

Ironically, police were tipped off to the entire operation after an internal rift where co-founder Vijay Kumar registered a police complaint against SS Alagh, a third partner, whom the latter accused of wanting to seize control of the entire operation.

“Kumar had lodged a complaint with the local police alleging that Alagh and his associates had kidnapped him,” an officer told local media. Kumar and Singh are now under arrest, while Alagh is currently at large.

In a first, Indian police have seized crypto mining equipment due to its involvement in an MLM scheme.

Meanwhile, an online petition filed by one of the victims against the operators of the alleged scam a month ago reveals additional details of the MLM scheme. The victim invested 0.1 BTC in July 2017 after the two operators promised a payout of 12% every month in bitcoin over an 18-month contract. The same victim was then encouraged to rope in additional investors, which he did, to earn an additional 12% return every month for 18 months.

“Its [sic] been almost 9 months we have not received any payouts or return on investment ,and [sic] we were requesting for our payouts , [sic] but he gives some excuse every time we ask for our payouts,… but now he stopped picking up our calls, or he keeps his phones switched off, now as heard he has left India and is in Dubai , [sic] with all the money,” an excerpt from the petition read.

Delhi police have also taken a local individual involved in the mining operation as investigators look to ascertain if the operators used additional mining equipment in other locations beyond what has been seized.