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Ayush Varshney, the co-founder and Chief Technology Officer (CTO) of Darwin Labs, a Forbes 30 Under 30 Asia 2018 award winner, was arrested last month by the Central Bureau of Investigation (CBI) at the Mumbai airport while fleeing the country. The case is connected with the huge GainBitcoin fraud, estimated to have defrauded investors by $2.1 billion.
Launched in 2015 by Amit and Ajay Bhardwaj, GainBitcoin was a cloud mining platform with fixed monthly returns of almost 10% over 18 months, numbers well above the real-life mining returns. The model gained mass adoption, especially in the post-2016 phase of the Indian demonetization, when the topic of cryptocurrencies gained popularity amid few regulatory controls.
According to Crypto Citizens Network, the scheme collected around 80,000 BTC and affected over 100,000 investors nationwide. It also added a referral system with a commission of up to 12%, which formed a pyramid-like system as new investments were utilized to compensate previous participants.
Varshney has been called by the CBI, the technical mastermind of the operation, claiming that his company, Darwin Labs, was the developer of key infrastructure such as the user dashboard, mining interface, and the MCAP token used within the ecosystem.
The defence, however, asserts that Varshney was merely a developer and not an operator, and it was mainly the responsibility of Amit Bhardwaj, who is now deceased.
The agency has challenged this assertion and said, “During the period of police custody, the accused did not cooperate with the investigation and deliberately withheld vital information, including details regarding the whereabouts of co-accused persons and possible stashes of the defrauded cryptocurrency,” The Indian Express reported.
The investigation escalated when a Supreme Court directive, in December 2023, resulted in raids at over 60 locations. Officials confiscated about $2.59 million worth of cryptocurrencies and extensive digital evidence. Despite these efforts, on April 7, a Delhi court granted him bail, ruling that there was no evidence showing he directly received investor funds.
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The GainBitcoin case is not the first among the growing number of high-profile frauds of Forbes 30 Under 30 alumni, which have been associated with over $18.5 billion of alleged fraud, including Sam Bankman-Fried and Elizabeth Holmes.
The dangers of cloud mining models have been cautioned on by experts long enough. Gavin Andresen, who took over from Satoshi Nakamoto in 2010 as lead Bitcoin developer, said, “They make no sense. I suspect many of them will turn out to be Ponzi schemes.”
This case points to the current struggle of regulation of crypto-related financial products and the need to have more transparency, due diligence, and more effective enforcement schemes in new digital asset markets.
