Crypto firm Bitcoin India accused of cheating investors, it puts onus on RB

Andhra Pradesh based Bitcoin India private limited with ties to the ruling party in the state faces allegations of fraud from investors, and is being investigated by Registrar of Companies (RoC) and state polices of two Telugu states.While the firm faces an investigation its director says investors can be paid back only if the Reserve Bank of India (RBI) unfreezes their bank accounts. He points to the RBI’s ban on cryptocurrency trade in India for the troubles faced by the company’s investors.

Bitcoin India is a cryptocurrency trading company where people can buy and sell cryptocurrencies online. The digital platform that began operations in 2014, up until 2018 allowed Indian owners of cryptocurrency to trade cryptocurrency and cash out in Indian rupees. The RBI's ban on cryptocurrency trade in 2018 froze the bank accounts of registered firms involved with cryptocurrency trade. The move invariably affected close to one lakh investors to whom the money belonged.

According to the RBI, cryptocurrency trade poses potential economic, financial, operational, legal, consumer protection and security related risks.

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Bitcoin India's directors Sykam Ramakrishna Reddy and Sykam Sreemannarayana Reddy, are brothers with ties to the ruling YSRCP in Andhra Pradesh. Ramakrishna claims to be the ex-state secretary and official spokesperson, YSRCP sevadhalam Tamil Nadu.

The investors

Gireesh V had invested Rs 3 lakh worth of bitcoins in Bitcoin India in 2017. He had even roped in a few of his family members and friends to invest in bitcoins. He did not anticipate a ban by the RBI on cryptocurrency trade. "Now I am facing the heat from people as theirs and my investments are stuck with Bitcoin India. I don't know what to tell them,” says the founder of a non-profit who says his reputation has been severely affected. "The portal stopped allowing us to withdraw and now they are charging a wallet maintenance fee," he adds.

A quick scan of the comments section at Bitcoin India’s social media profile shows persons referring to the company as fraudulent and they are trying to crowd-source litigation against the firm for not allowing them to withdraw their bitcoin investments.

Yogesh Bhapkar, a Facebook user wrote, "Why you selling our crypto coins by just giving the reason of maintenance charges without any notice. I read all your term and conditions there is no information about these charges except 0.10% commission during buying and selling.” The investors who are unable to withdraw money stuck in the digital wallet of Bitcoin India since the RBI ban, have been paying wallet maintenance fees of Rs 100 every month to the trading platform.

Their fear is that their bitcoin investments lying dormant will be eaten up by Bitcoin India in the form of maintenance fees over time. "There is no telling for how long the RBI will keep cryptocurrencies banned," says Gireesh.

"Why we should pay you wallet maintenance fee? Just enable crypto transfer option and I will take all my crypto from your wallet. You have deducted almost all my assets in the name of maintenance," wrote Anand Singh, another investor.

None of these victims have filed a formal complaint yet. The first complaint against the cryptocurrency firm was by Chitranjan Sah, a resident of Delhi, filed over a fraudulent transfer of Rs 4500 from Freecharge wallet to ICICI Bank account of Bitcoin India in 2016. Ramakrishna claims he has settled it with the complainant. Chitranjan is yet to confirm if his investments were settled by the firm.

Bitcoin India Director Sykam Ramakrishna Reddy insists he intends to pay every investor's money back. "All the investors’ money are in the bank accounts that RBI has frozen. The office is shut, most customers have abandoned the platform and there is no revenue to show the taxmen. I started levying wallet maintenance fee to pay for the servers,” he says.

In the bad books

Bitcoin India is among the 1,305 firms that have not filed annual returns of their incomes in the last two years in Andhra Pradesh. In neighbouring Telangana, about 3,410 firms have not filed their annual returns in the last two years. The Ministry of Corporate Affairs (MCA) under which the RoC functions, had initiated a nationwide crackdown this year sending notices to firms with inactive accounts and no tax filings, seeking their responses. Those companies that do not respond before August 31 will be shut down permanently, at least on paper.

Bitcoin India also has not filed its balance sheet nor its annual return for the past two years and qualifies to be shut down by the RoC but they will not be shut down. "If we shut them down, then the investors won't get their money back," says the RoC official.

Though the firm has not yet responded to two of the notices, one of their directors had sent the official a Facebook friend request which he duly ignored. Ramakrishna insists he has filed advance tax returns and has not filed annual returns as there was little or no revenue.

"There are several complaints against the firm but only one complaint has been made officially," says the RoC official who hoped more people would come forward with complaints against the companies for serious fraud, management dispute, financial irregularities, accounting fraud etc. "It was only at the state level committee meeting between the various central and state departments, we came to know that Andhra Pradesh, Telangana state police, their CIDs have also received complaints of cheating by Bitcoin India. Their office has been shut but they're still roping in investors online," he adds.

Speaking on why no action has been taken against the directors of Bitcoin India so far, the official cites the lack of complaints. "People are unaware that a complaint using an SCP (Serious Complaint Form) can be filed with the RoC. We can help them get their investment money back through the NCLT," the official adds.

How the troubles began for Bitcoin India

For Ramakrishna, things were looking up when he began his startup from T-Hub, Telangana's incubation centre for upcoming startups in Hyderabad. Trouble started when he shifted base to his hometown in Andhra Pradesh intending to win over the local youth through customer support jobs at his startup. "I was politically targeted by the local leaders as I was associated with the YSRCP. When we first started, our backend service was not good. We were a team of just 50 people and on an average, there would be close to a lakh transactions in a day. We were doing everything manually and it took time for accounting work. There were customer complaints when withdrawals would take a week or more. This flaw was used to spread rumours about us, and within four months, the police forced us to close our office. We were hoping to touch 2 to 3 lakh transactions in 2017 but in June that year, the RBI froze all bank accounts and everything ended," he says.

Bitcoin India was sued multiple times by its investors, but Ramakrishna says he has settled all their claims. He claims that the firm is willing to settle dues of all those who choose the litigation route.

"We even requested the banks to allow us to process the funds so that we can repay the investors, but they are not allowing citing the RBI order to stop all crypto transactions," says the director of the firm that has stopped all transactions linked to Indian rupees. "The problem is that we are a startup in the bitcoin sector, and there are no RBI guidelines for us. There is no clarity under what section we should file income tax. This has brought IT troubles also, now the firm can't even open a current account as the banks won't allow it.”

The company director claims that the number of transactions over the platform “is so low" that they don't even need to file income tax. "When I started this, my only intention was to provide jobs to around 1,000 people in my district. Now I just want the RBI to unfreeze the firm's bank account so I can pay off the people whose money is stuck in the platform and clear my name," says Ramakrishna.