On 9 July, the Times of India’s Sunday edition carried a full front-page advertisement for Cryptocurrency for Beginners: an e-book written by the entrepreneur Amit Bhardwaj, priced at a steep Rs 1,499. The ad boasted that the book was “Introducing everyone to the world of cryptocurrencies and how it is changing the financial landscape.” Around the same time, Bhardwaj also issued front-page ads in other major dailies, including The Hindu, the Economic Times and Dainik Jagaran.
The promotional campaign for Cryptocurrency for Beginners has been extensive. In addition to the newspaper ads, sponsored posts ran on several publications—prominent Indian outlets such as NDTV’s Profit, Hindu Business Line, and the Indian Express, as well as cryptocurrency-focussed websites such as the Bitcoin News and News BTC. The official site on which people can purchase Bhardwaj’s book even displays links to effusive tweets about it from a handful of celebrities, among them the actors Shilpa Shetty, Vir Das and Nargis Fakhri.
— SHILPA SHETTY KUNDRA (@TheShilpaShetty) July 7, 2017
Cryptocurrencies—digital currencies built on an innovative technology called blockchain—have attracted much attention from investors in recent months. Blockchain technology is essentially a distributed database that acts as a public ledger. Each transaction on most blockchain-based currencies is recorded and transmitted to every node in a worldwide network of computers. The oldest and most popular cryptocurrency, bitcoin, which pioneered the blockchain, has more than tripled in price since the start of 2017, climbing from about $998 on 1 January to $3,574 on 11 August—an all-time high.
Likely catering to those hungry for a piece of such profits, the ads for Bhardwaj’s book promised that its purchase would come with “Rs 1,200 worth of cryptocurrency, free.” But a brief look beneath the surface of Cryptocurrency for Beginners reveals that, not only is the book of little educational value on its own, its promotional campaign is also part of an attempt to lure investors into his dubious business schemes. This is only Bhardwaj’s most recent ruse: in a cover story for The Caravan’s March 2017 issue, I examined the Ponzi-like workings of Gainbitcoin, a multi-layer marketing company he runs. The story details how Bhardwaj’s company is selling a supposed cloud-mining scheme to its investors, and promising them unrealistic returns—the nature of which suggest that his business plan is dubious at best, and at worst, a grand scam.
With the book, Bhardwaj is only furthering these ploys. The “Rs 1,200 worth of cryptocurrency” that comes with his book is not denominated in bitcoin, nor in any other popular form of cryptocurrency. Instead, buyers are promised “MCAP Tokens”—digital units of value that Bhardwaj has created. MCAP Tokens were launched by MCAP Labs: a new company that Bhardwaj has founded.
To understand MCAP Tokens, it is important to their relationship to the cryptocurrency Ethereum. The cryptocurrency boom of the past few months has been especially dramatic for Ethereum. In addition to being the second most popular cryptocurrency in the world, Ethereum is also a computing platform on which blockchain-based products—such as MCAP Tokens—can be built. Lately, many blockchain-oriented companies have raised capital for their ventures by engaging in ICOs, or initial coin offerings. In this, ICOs resemble IPOs, or initial public offerings—where companies offer stock shares to prospective investors as a means of raising capital. In the case of blockchain-oriented companies, instead of shares, the company issues cryptocurrency-based tokens. Investors buy these tokens—digital assets, often built on the Ethereum platform—in the hopes that they will appreciate in value. The recent flurry of ICOs has been a major reason why the price of Ethereum has skyrocketed this year, from a little over $8 on 1 January to nearly $301 on 11 August. At the height of this recent ICO boom, on 13 June, the cryptocurrency’s price reached an eye-watering $388.
In late April, MCAP Labs launched an ICO by issuing the Ethereum-based “MCAP Tokens,” selling them at about $5 each, with some discounts for early investors. Since then, the price of the token has dropped precipitously—to a current level of $1.89 per token, as listed on 11 August on the site CoinMarketCap.
The interests of MCAP Labs are closely intertwined with those of Gainbitcoin. Recently, Bhardwaj decided that investors with ongoing Gainbitcoin contracts would receive their monthly payouts in MCAP Token, instead of bitcoin. The MCAP Token price that Gainbitcoin uses is determined by Bitcoin Growth Fund—an online exchange that is one of the only sites to sell MCAP Token, and which is also run by Bhardwaj. This can, and does, lead to price inflation—for instance, as of 11 August, Bitcoin Growth Fund was using $5 as the value for one token, contrasted with CoinMarketCap’s $1.89. As a result, Gainbitcoin investors, whose returns are calculated according to the Bitcoin Growth Fund’s inflated valuation, receive fewer tokens for their bitcoin than they are owed.
Shubham Jain, a tax consultant and accountant who invested in a Gainbitcoin contract this April, described the company’s transition from bitcoin-based payouts to MCAP Token ones as “a breach of contract” with its clients. “We are being forced to get MCAPs,” he said. Gainbitcoin investors, Jain told me, are required to use the digital-wallet service CoinBank, which Bhardwaj also owns and—it appears—manipulates. Though an investor’s CoinBank wallet might show a balance in bitcoin, Jain said, “now we cannot withdraw again unless we transfer to MCAP wallet.” Bhardwaj, Jain claimed, is essentially holding investors’ bitcoin hostage, forcing them to accept payment in a token that seems to be haemorrhaging in value.
On 12 July, Bitcoin Magazine published an article about MCAP Labs, which states that, “with the Ethereum ICO, GainBitcoin has effectively created more money out of thin air to keep the scheme going.” The article also casts doubt on the seemingly impressive numbers that MCAP Labs cites about the token’s trading and circulation volumes—for example, the Bitcoin Growth Fund website claims that MCAP Labs has sold nearly nearly 7.5 million MCAP Tokens, priced at $5 each—funding of over $37 million. “It’s unclear how reliable the trading data on the Bitcoin Growth Fund website is since it is also connected to Bhardwaj,” the article notes. (It seems quite plausible that Bhardwaj would attribute exaggerated figures to MCAP Token, given that he already admitted to me, when I was reporting the March cover story, that he posted inflated investment figures to the Gainbitcoin website because higher numbers made customers “feel good.”)
Shiv Mehta, a cryptocurrency enthusiast who often advises people on blockchain technology, told me that, while some may claim that the total amount of MCAP Tokens in existence is worth millions of dollars, “these tokens are, in fact, worthless,” because it is so difficult to sell them. He said that, while “these investors would be thinking they’re rich on paper, as they hold these MCAP Tokens,” they will soon realise that most cryptocurrency exchanges and savvy investors will not consider buying them. Referring to Bhardwaj, Mehta added, “Until the money gets dried or he comes up with a new scheme, he’ll continue this.”
The money seems to be flowing for now. A video uploaded to YouTube in early May shows the launch event for MCAP Token, in which Bhardwaj stands in front of a massive screen atop a stage, at the edge of which large three-dimensional letters stand, spelling “GAINBITCOIN.” “I can assure you this is going to change your life,” Bhardwaj says before beginning his presentation, as the crowd cheers and cannons fire smoke and shiny confetti into the air.
Jain has made many attempts to lodge complaints with Gainbitcoin’s support staff, but they have been met with silence or indifference. Angry comments under many posts on the Gainbitcoin Facebook page, as well as on that of MCAP Labs, suggest that he is not alone in this experience. Jain told me that the company has even begun asking customers to pay if they want their complaints to be addressed quickly. He shared screenshots with me of the two options Gainbitcoin provides its clients: “normal support” promises a response in 24 to 48 hours, whereas “paid support” promises a response in two to four hours, but it costs 0.01 bitcoin—currently worth about Rs 2,200.
Towards the end of my conversation with Jain, I asked him whether he would consider investing in Gainbitcoin again. “Definitely not,” he replied. But Jain, like thousands of others, is stuck in his non-refundable, 18-month contract. “I wish I had done my research,” he said.
The prospects of MCAP Token as an investment depend closely on the prospects of MCAP Labs as a business; an ICO is, after all, about betting on a company’s future profitability. Though its marketing materials are incredibly vague, MCAP Labs generally seems to be pitching itself as a crypto-focussed hedge fund, through which in-house analysts invest strategically in cryptocurrencies, ICOs and mining projects, to yield handsome returns for clients.
But a look at the MCAP Labs website makes one doubt whether MCAP Labs has the tools, or the will, to do this. The MCAP Token “white paper”—an explanatory manifesto that is considered necessary in the cryptocurrency world from every company attempting an ICO—is an insipid, haphazard document that strings together basic information about largely irrelevant things, including the histories of different cryptocurrencies, the composition of middle-class populations in countries across the world, and information about how to mine cryptocurrency. It explains next to nothing about how MCAP Labs promises to bring about innovation or profit. “MCAP will be designed with algorithms and analytics at its core to separate the wheat from the chaff,” is about all the explanation the white paper provides about the company’s investment strategy.
The MCAP Labs website also reveals no details about who is making the decisions about the company’s investments—though the white paper does mention an “experienced team of analysts,” and, specifically, a “dedicated team of analysts at Bitcoin Growth Fund.”
This information may be absent because Bhardwaj has already been caught in a lie about the matter. About two months ago, an anonymous user on the blockchain-based social-media platform Steemit wrote a long post that labelled Bhardwaj’s Bitcoin Growth Fund a “new crypto scam by a group of old scammers.” The post shows, with screenshots, that Bitcoin Growth Fund’s website once listed profiles and photographs of several individuals who were purportedly part of the team. According to the post, when the Steemit poster contacted one of these men, he said he was “not connected to the fund” after all and was only “advising on companies the fund might consider investing in.” Now, the Bitcoin Growth Fund site has no information whatsoever about its team, nor does the MCAP Labs site.
The absence of information about who is running a company raises serious red flags. In fact, MCAP Labs has pointed this out itself, in a blog post that gives advice to investors about the many factors to consider before putting one’s faith in an ICO. One of the factors to scrutinise, MCAP Labs says, is the project’s development team. “Who is working exclusively on this product?” the post suggests asking. “Are there experienced specialists? Do they have support from known experts?” Going by MCAP’s own website and white paper, investors would be able to answer none of these questions.
MCAP Labs also makes claims that run counter to basic financial literacy. A video embedded on the Bitcoin Growth Fund website asserts that, given the recent price spikes in bitcoin and Ethereum, it is “inevitable” that MCAP Token will also rise in price to $100 per token by 2018 (from the initial price of $5—notwithstanding the current, even lower one—that would be a projected leap of 2,000 percent). No one, not even the most sophisticated investors, can accurately predict market movements with such precision, much less declare them “inevitable.” This statement is made even less coherent by the fact that it uses the future spike in the price of one commodity—MCAP Token—based on past spikes in prices of entirely different commodities—Ethereum and bitcoin. Statements such as this betray either a misunderstanding of how investing works, or, more likely, an intent to bamboozle gullible investors.
I posed questions to Bhardwaj regarding MCAP Labs and MCAP Token, as well as the recent switch to the token for payout to Gaintbitcoin investors. He responded by saying he is “not interested” in commenting.
However poorly strung together MCAP Token’s white paper and advertising copy may be, both seem positively scholarly in comparison to Cryptocurrency for Beginners. The book contains some blatant factual inaccuracies—for example, Bhardwaj appears to claim that bitcoin is “only four years old” (it is eight years old); that cryptography and encryption are the same thing (they are not); that the US dollar is backed by gold (it has not been since the 1970s); and, perhaps most strangely, that the “monopoly” of the bitcoin exchange Mt Gox is negatively affecting the cryptocurrency sphere—in fact, Mt Gox has been defunct for years now. There are entire paragraphs so garbled that they are meaningless word salad:
Cryptocurrency mining, the most impressive technological development.So are you thinking of being a cryptocurrency miner this introduction will get you started.mining will be how you will make it be however this will be a handbook for you to follow on your way to be a cryptocurrency mining genius?
But, most fundamentally, Cryptocurrency for Beginners conveys very little useful information for people genuinely interested in the subject. A jargon-free, in-depth explanation of what blockchain is; its different technological applications; a description of the legal and regulatory debate around cryptocurrency in India, including whether or not one has to pay taxes on it—all of these issues are either left unaddressed or barely touched upon in Bhardwaj’s book. What is provided is a repetitive, poorly organised set of chapters that constitute a puzzling hodgepodge of information, some of which is overly technical. Casting Bhardwaj’s checkered business history completely aside, any reader would be much better served by saving Rs 1,499 and surfing cryptocurrency-related entries on Wikipedia for a few hours.
This is not to say, however, that the book is entirely without merit. It dispenses wisdom, for instance, on some issues that cryptocurrency investors should be wary of. “There is no guarantee that you can be able to protect your bitcoins from human error, digital failure or malfunction or fiduciary fraud,” Bhardwaj writes. “An article written in the UK showed that 18 out of 40 companies that offered to exchange bitcoins into other fiat currencies ran out of business and only a handful was able to pay back their clients.” Given the direction that Bhardwaj’s businesses are headed towards, it seems that many of his investors will soon learn the same lesson—whether or not they buy his book.
Aria Thaker is a copy editor at The Caravan.