November 13, 20184min773

Busted: Indian Crypto Ponzi Scheme Lured Muslims With Halal Investment Promises

An Indian cryptocurrency Ponzi scheme masquerading as an investment company has crumbled in the aftermath of the Reserve Bank of India’s declaration of cryptocurrency as “illegal tender”.

The Deccan Chronicle reported this week that Ambidant Marketing and Investment Company, run by father and son duo Syed Fareed and Syed Afaq Ahmed, used promises of Halal investments alongside misused Ulemas (Islamic theology scholars) to position itself as a Sharia-compliant investment program for Muslim investors, bringing in huge amounts of investor money without declaring its crypto investment positions.

Deceitful Investment Practices

According to reports, the company used the cover of Halal businesses and investments to attract Muslim investors who were then promised fantastic monthly returns of as much as 50 percent per lakh Rupees (approximately $275). Specifically targeting Muslim investment, the company also allegedly used Ulemas to market its activities as Halal. Without informing investors, the company would then invest the takings in cryptocurrencies where it made a fortune, enabling it to pay the promised returns for a while until the scheme grew bigger. Its crypto investment positions and exposure were never revealed to investors through this time.

As more investors joined the ponzi scheme, payout sizes declined first to 25 percent, and then to 11 percent before finally paying out 9 percent in January 2018, which was its last payout. Before it stopped paying out, some investors had earned up to double their initial investment amounts, which ranged from Rs 50,000 (about $685) to over Rs 1 crore (roughly $137,165).

Following the RBI’s declaration of bitcoin as “illegal tender”, India’s Enforcement Directorate which oversees financial law enforcement turned its attention to Ambidant’s activities. It was one of over 4,000 companies placed under similar investigation, but unlike the majority of the others, its investors had no idea about its cryptocurrency investment exposure.

Speaking about its case findings in a statement released earlier, India’s Enforcement Directorate said:

“During the investigation, it came to the fore that the scheme run by the company is surely a potential Ponzi scheme. In view of the above, ED has written to the RBI (Reserve Bank of India) to have another look into the matter and protect the interest of the investors/depositors at large who are being duped in the name of Islamic banking/halal investment.”

In addition to deceiving investors and running a Ponzi scheme, the activities of Ambidant may well have been at odds with Sharia law itself. A number of Islamic scholars are of the opinion that cryptocurrency trading is not a Halal practice because cryptocurrencies lack intrinsic value or centralized government support, both of which they say are required in order to be considered a currency under Sharia law.

However, there is no consensus of Islamic opinion on this point. In April, CCN reported that Mufti Muhammad Abu Bakar, a Sharia adviser and compliance officer at Blossom Finance in Jakarta published a paper classifying Bitcoin as Halal, a pronouncement which led to a $1,000 price jump.

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