The shadowy world of crypto

In an overnight assault earlier this month, Iran launched more than 300 drones and missiles against Israel. However, the aftershocks of this attack, codenamed ‘Operation True Promise’, were felt in a completely different universe.

Bitcoin, the most widely traded cryptocurrency, witnessed a ‘flash crash’ in trade, sliding from a record-high 70,000 to 60,000 dollars per Bitcoin. A slew of other cryptocurrencies, ranging from Solana to Ethereum and even the now hated, now loved Dogecoin, tanked. In one fell swoop, over 500 billion dollars were wiped off the combined crypto market.

Stunned? You shouldn’t be. Cryptocurrencies, touted as a potential way of democratising wealth, are the most vulnerable to sudden changes in the world — economic or geo-political.

I started researching the crypto scene in 2019, although its most remarkable bull run came in 2021. A large part of my journalistic career has been about studying, tracking and writing about financial assets like stocks, and I was drawn to understanding how much of a magnet crypto was for India’s youth. I was also intrigued by the sharp reactions it brought out in people, either of staunch support or intense hatred. Then, there was recurring news about crypto crime.

The research resulted in my book ‘Crypto Crimes — Inside India’s Best-Kept Secret’ (HarperCollins India), which hit the stands recently.

What is it?

Cryptocurrency acquires its name from the idea that it is ‘encrypted’. Think of it as a cross between a currency and a digital asset. You can use it to purchase things — from watches, cars, diamonds, yachts and space flight tickets to furniture, flowers, books, movie passes and coffee. Even crypto donations are a thing. You can invest it for long-term and most often short-term gains. The reason crypto sits parallel to the financial world is because it doesn’t rely on banks to verify transactions or involve payment processors for cross-border payments.

It is a peer-to-peer system in which transactions take place directly between the sender and the receiver over the Internet. In the same way a physical ledger or notebook is used to record money going in and out, an online database, called the blockchain, documents crypto payments.

Anyone who thinks crypto trading is a small or fringe activity is thoroughly mistaken. Data compiled by research firm CREBACO (Credit Rating for Exchanges Blockchains and Coin Offerings) is a case in point. As of November 2021, about 15 million Indians had invested in cryptocurrencies through Indian exchanges.

Awareness about crypto increased during the pandemic years. It also witnessed a jump in women participating in the crypto economy. I gathered that smaller cities like Giridih in Jharkhand, Gaya in Bihar and Karnal in Haryana were as crypto-savvy as the metros. But I was most surprised to learn that crypto coins, especially Bitcoin, had become a buzzword in parts of Gujarat all the way back in 2017.

There is no clear data on unemployment fuelling crypto investments but it appealed to the ‘tech-first’ generation, in the 22–30 age group.

‘When Lambo’ dreams

For many young people who don’t have enough resources to invest in the equity market, crypto trading involves small sums of investment and quick returns, like with a lottery ticket. Quite a few made a sudden killing. One trader from Jaipur used the profits to buy a sports bike, another, a documentary filmmaker from Delhi, bought a high-end phone and a camera, and a girl in Bengaluru said crypto was part of dinner-table conversations with family and they splurged the gains on vacations. ‘When Lambo?’ is often the goal. In crypto-speak, it means when are we getting rich enough to afford a Lamborghini?

I came across crypto seekers from all walks of life — from a journalist in Delhi to a businessman in Rajasthan to a reclusive man holed up in his apartment in Kerala. Some hailed from upwardly mobile families. In 2016, at the age of 21, Sapna Singh quit her IT job to become a crypto influencer on YouTube and now she is an author too. First you learn, then you remove the ‘l’, she writes in her book ‘The Basics of Crypto Market’. Some crypto investors switched from running call centres to operating ‘mining rigs’.

A mining rig is a computer system customised for cryptocurrency mining (mainly, validating transactions on the blockchain). Anytime a crypto coin is traded anywhere, these computers race to record and verify the transaction. The system that does it first earns most rewards and the time taken can vary from 10 to 300 minutes!

These calculations are energy-intensive. According to an analysis by Cambridge University, Bitcoin alone uses more electricity per year than the country of Argentina. Farmlands in north India, I found, had been cleverly converted into sites for mining rigs — power rates for agricultural use are low. South India had embraced solar rooftop power units to cut costs.

The rigs are expensive to assemble and markets like Nehru Place in Delhi and Bidhan Nagar in Kolkata are where mining enthusiasts go to collect cheap parts.

Not everybody was gung-ho about crypto. Prince is among the ‘invested sceptics’ I met. He said, “You are purchasing a f**king 64-digit code with no value. It can crash any time.” And Shaurya Sharma, a media professional, is unsure about its charm. When he is doing creative work, he gives it his 100% and the money follows, but the profits from crypto are not as satisfying. “It is easy money,” he explains.

Web of deceit

I didn’t buy crypto coins to get behind the scenes. Instead, I spent a lot of time as a quiet observer on WhatsApp and Telegram channels that sprang up, claiming to provide trading tips and ‘sureshot’ deals.

The chase for fast money was taking many wrong turns, I would discover. The year 2022 saw illicit crypto transactions worth 39.6 billion dollars, spanning cyber crime, ransomware and terror financing on the darknet. The crypto-romance scam, where a victim is befriended, seduced and financially exploited, is also rampant, as is illegal betting and looting crypto accounts at gunpoint to turn black
money into white.

I was keen not just on investigating the crypto crimes but also on giving space to the many voices who understood the complexity of this phenomenon. My curiosity took me to entrepreneurs who had built thriving crypto exchanges, influencers who chose to be paid in crypto to circumvent taxes and accountability, and people who had lost money to get-rich-quick schemes.

In early 2022, the Enforcement Directorate busted a fake cryptocurrency racket in Kerala, where about 900 investors had been cheated of Rs 1,200 crore. The scammers had floated an ‘initial coin offering’ to launch Morris Coin, a non-existent cryptocurrency on the Coimbatore-based Franc Exchange. The victims were lured on WhatsApp and YouTube and with promotional events featuring celebrities. They were promised daily returns of 3% on an investment of Rs 15,000. The accused, now arrested, had siphoned off the money to buy cars, crypto coins, and properties in Karnataka, Tamil Nadu and Kerala.

Drugs and data

Every interview showed a different side of aspiration and greed. The story of Bengaluru resident Sri Krishna Ramesh aka Sriki stands out. It was a sensational scam, involving the hacking of a crypto exchange, several gaming sites, and the Karnataka government’s e-procurement portal.

Arrested on drug peddling charges in 2020, the 20-something purportedly told the police he had blown up a fortune on living it up: “I did not save anything. I spent around Rs 1 lakh to Rs 3 lakh a day on alcohol and hotel bills.” A large part of his cat-and-mouse game with the police involved travelling through India and staying in five-star hotels in Shimla, Chandigarh, Delhi, Goa, Manipal and Bengaluru.

All my attempts to reach Sriki, out on bail, and his family failed. A senior policeman told me,…