The Central Bureau of Investigation (CBI) on Wednesday said it has arrested Ayush Varshney, Co-Founder and Chief Technology Officer of Darwin Labs Private Limited, into custody. This GainBitcoin cryptocurrency scam makes it one of the most significant crypto fraud cases in India. As per the officials, the scheme enticed investors with promises of unusually high returns from Bitcoin-related investments. Officials allege that the funds, rather than supporting legitimate cryptocurrency mining or trading activities, were subsequently misappropriated. The investigation is currently focused on Sections 120B, 406, and 420 of the Indian Penal Code. Additionally, Section 66 of the Information Technology Act, 2000, is also being applied.
CBI Probes Alleged Ponzi-Style Crypto Investment Scheme
According to the CBI’s press release, a Look Out Circular (LOC) had been issued against Varshney as he was absconding. On March 9, immigration authorities at Mumbai airport intercepted him while he was allegedly attempting to leave India. He was subsequently handed over to the CBI and formally arrested on March 10.
The investors in the GainBitcoin scheme were led to believe they would receive consistent monthly returns in Bitcoin, generated through a cloud mining program. Authorities are now looking into whether the operation functioned like a Ponzi scheme. The investigation is based on claims that returns to earlier investors were paid using the money from newer participants, instead of being generated by actual mining operations.
When payouts became difficult to sustain, investors were compensated with a cryptocurrency token known as MCAP instead of Bitcoin.
During the investigation, the role of Darwin Labs Private Limited and its co-founders, including Varshney, Sahil Baghla, and Nikunj Jain, emerged in connection with the development of the technical infrastructure used in the alleged scheme. Investigators said the company helped design and deploy the MCAP cryptocurrency token and its associated ERC-20 smart contract.
According to the CBI, Darwin Labs was also involved in building platforms linked to the project, including the GBMiners.com Bitcoin mining pool, a Bitcoin payment gateway, the Coin Bank Bitcoin wallet, and the GainBitcoin investor-facing website.
The GainBitcoin probe is centred on accusations of fraud totalling thousands of crores, impacting investors in several states. The CBI confirmed that the investigation is still active, and more updates on the case are anticipated.
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