Crypto scam: How were investors duped to the tune of Rs 1,200 crore?

Over 900 investors have allegedly been cheated out of Rs 1,200 crore through a cryptocurrency scam that offered staggering returns of up to 3 percent a day on an investment of Rs 15,000 made to purchase Morris Coin, a fake cryptocurrency.

The accused, 31-year-old Kerala resident Nishad K, and his partners allegedly collected deposits from investors under the guise of an initial coin offer (ICO) for the launch of Morris Coin cryptocurrency.

An ICO is the crypto industry’s equivalent of an initial public offering (IPO). A company seeking to raise money to create a new coin, app, or service can launch an ICO as a way to raise funds. Interested investors can buy into an ICO to receive new cryptocurrency tokens issued by the company.

People were lured to invest in the seemingly attractive schemes through WhatsApp messages, where they were offered Rs 270 every day for 300 days and 15 Morris Coin cryptocurrency worth Rs 1,500 each on investing Rs 15,000 through agents in the crypto wallets provided by the promoters.

The agents were reportedly given 10-30 percent commission for getting people to invest in Morris Coin.

Nishad looks to have executed the plan meticulously, conducting several promotional events in the presence of celebrities, introducing investors to flashy websites and appearing in YouTube videos urging people to invest as much as possible.

Nishad told investors that the cryptocurrency was to be listed on Coimbatore-based Franc Exchange, after which the value of the tokens would increase manifold. However, the coins were never listed.

While the accused did not have an office of his own, nor share his personal contact details with anybody, he managed to collect huge sums from unsuspecting investors which he transferred to his bank account and that of his firms and subsequently to shell companies.

Working like a multi-level marketing scheme, those who enlisted others received lucrative commissions and the network flourished rapidly. However, when investors stopped receiving money, the whole network collapsed.

Investors were earlier pacified with the promise that the promoters of Morris Coin were planning to issue ATM cards to cope with the high number of customer withdrawals. However, when patience ran out, investors approached the police and the case was later transferred to the Enforcement Directorate (ED) due to the enormity of the crime.

On the basis of multiple first information reports (FIRs) registered by people cheated out of their money, the ED booked and arrested Nishad and attached assets valued at Rs 14 crore under the Prevention of Money Laundering Act (PMLA), 2002.

The attached assets include balance in bank accounts of Flywithme Mobile LLP (a firm owned by Nishad and another accused, Hasif K) and immovable properties of associates of Nishad that were purchased using the proceeds of the crime.

The ED has also attached funds held in the bank accounts of a hospital in Kochi, apart from 52 acres of agricultural land in Tamil Nadu.