The Enforcement Directorate (ED) in India has seized digital assets valued at $197 million linked to the defunct BitConnect lending program, marking a significant milestone in the country’s efforts to combat cryptocurrency fraud. The operation, conducted under the Prevention of Money Laundering Act (PMLA), targeted the proceeds of crime related to BitConnect, a Ponzi scheme that operated from 2016 to 2018, promising high returns through a non-existent trading bot. The fraudulent claims and multi-layered laundering techniques used by the scheme have resulted in a global investigation, with India’s actions highlighting its growing expertise in the decentralized finance (DeFi) space.
BitConnect attracted global investors, including many from India, by promising 40% monthly returns through its proprietary “volatility software trading bot.” Investigators later found that the bot was never real and the platform used fictitious daily returns of 1% to give the illusion of profitability. The scam collapsed in 2018, leaving behind significant financial losses worldwide. Despite these fraudulent practices, BitConnect’s operators, including founder Satish Kumbhani, who is currently facing charges in the U.S., used sophisticated methods to launder investor funds, including dark web-linked crypto wallets and smart contract honeypots.
The ED’s cyber forensics team uncovered more than 12,000 wallets associated with the scheme, using advanced tools to trace funds and identify cold storage devices hidden in Gujarat. These devices contained a variety of cryptocurrencies, including Bitcoin, Ethereum, and privacy-focused Monero. The ED’s investigation also revealed that the scam’s operators utilized techniques such as sweeper bots, which redirected deposits to offshore wallets, and mixers like Wasabi Wallet to obfuscate the flow of funds. By reverse-engineering blockchain ledgers, the ED was able to uncover crucial evidence and seize assets, including $16,000 in cash and encrypted hardware wallets.
The seizure of these assets underscores India’s increasing ability to tackle cryptocurrency fraud, with the ED’s investigation demonstrating advanced blockchain forensics and international cooperation. The U.S. SEC continues to pursue its own investigation into Kumbhani’s global scam, and Interpol is coordinating efforts to restore assets to the defrauded investors. The ED’s actions, coupled with its earlier attachment of $60 million in domestic assets, set a strong precedent for the regulation of DeFi projects and cryptocurrency-related crimes in India, signaling tighter scrutiny and cross-agency collaboration in future investigations.
