Inside India’s Booming Investment Fraud Economy

“If it sounds too good to be true. It probably is.”

For many victims, investment scams do not begin with suspicion. They begin with excitement. Rising numbers on a screen, messages promising “early access,” and testimonials claiming life-changing returns create the impression of legitimacy. What follows is often slow and quiet: withdrawals marked “under process,” support teams that stop responding, and platforms that suddenly go offline. By the time victims realise something is wrong, the money has already moved far beyond reach.

Almost $10 billion in revenue was estimated to be lost to crypto and investment-related scams in 2024, and experts expect a record high of $12 billion in 2025. The “Pig Butchering” method is growing at a rate of 40% and has also seen a significant use of AI, along with an increase in sophistication within the fraud ecosystem.

The Central Bureau of Investigation (CBI) conducted raids at 60 locations across India, uncovering a loss of ₹6,600 crore linked to the GainBitcoin scam. Launched in 2015, the scam operated as a pyramid-structured Ponzi scheme. However, by 2017, the inflow of new capital began to decline, resulting in multiple complicated FIRs being filed across the country.

This industry is still booming due to financial illiteracy, hype culture, irregular law enforcement, technical opacity, and complex international cooperation.

Scammers often employ psychological tactics and the science of persuasion for unethical purposes. Practical preventive measures like constant questioning and querying, verifying the brokers or companies, and being extra skeptical of unsolicited advice, offers, advertisements, and high-risk investments, etc.

While the forms these scams take may differ, the logic behind them is consistent. Complexity is used to discourage questions, urgency to override caution, and familiarity to build trust. Understanding how these scams operate is critical, because once they collapse, recovery is rare and accountability even rarer.

Types and variations of scams

1. Ponzi scheme

A Ponzi scheme is where investors invest money into a product or service that will generate profits, but scammers invest that money into a nonexistent product or company and commit monetary fraud. Here, the payment collected from new investors is used to pay off old investors as “returns,” and a portion is retained by them. Paying off old investors makes the investors believe that they are receiving their promised profits, making the scheme appear profitable and giving them a false sense of security.

To sustain itself, this scam needs a constant flow of funds, so the scammers often target a group or a community, or places of worship, to find hundreds of investors. This bubble bursts (always does) when the organisation can’t find more new investors or a large number of investors cash out at the same or around the same period.

This scheme derives its name from Charles Ponzi, who in 1919 committed a fake postage stamp investment scam, promising 50% returns within three months from international reply coupons.

Pyramid schemes are often confused with Ponzi schemes, but in pyramid schemes, the investors are aware that they can make a profit only by recruiting more people; in Ponzi scams, investors genuinely believe that they are making a profit.

2. Guaranteed high-yield returns

Brokers or advisors assure that the investment you make will have guaranteed high-yield returns without any risk of loss. This is impossible, considering that markets are never stable enough to create such returns.

3. Rug pulls / exit scams

Rug pulls in cryptocurrency happen when one currency or token is abandoned abruptly after its assets were raised, diminishing or rendering its value worthless. They have huge ownership, unverified teams, and have ‘anti-dumping’ claims that prevent the investors from selling the tokens or assets on their own.

It occurs in different types of rug pulls:

1. Hard pulls are sudden and abrupt, where investors lose all their assets in a short time.

2. Soft pulls are done slowly and over a longer time period, creating a false sense of time.

3. Liquidity pulls cause the open value to plummet due to a lack of buyers; the value of the token plummets as insiders dilute liquidity by selling those tokens.

4. Scammers create fake projects, gather investment, and then leave.

5. In the team exit, various teams begin to leave, leaving the investors without support.

   
   

4. Pump and dump

Scammers spread misleading information to create a buzz around a thinly traded stock or low-liquidity token to “pump” the prices of that stock and then “dump” their own shares at high prices. After dumping their own shares, which were used to hype the stock, stock prices typically fall, and investors lose money. Scammers often tell the investors exactly when to buy stocks and when to sell their shares. Influencer or celebrity endorsements are also a type of pump-and-dump technique. For example, Kim Kardashian has been fined $1.26 million for failing to disclose that the crypto token “EMAX” was promotional, as she advised the token on her Instagram page and instructed her followers on how to buy the token.

In recent years, investment fraud has increasingly overlapped with emotional manipulation. Scammers no longer rely only on financial hype; they now exploit relationships, trust, and long-term psychological grooming, making victims far more vulnerable than in traditional investment scams.

5. Pig-butchering / romance con

In “pig-butchering,” scammers connect with their victims online (through social media, dating apps, gaming apps, etc), and start messaging them and building any form of relation over a period of time. Usually, these relationships are romantic, intense, and they propose “can’t miss an opportunity” in casual conversations or show off a lavish lifestyle that they got via these investments. (It is obviously fake.) Scammers offer to train the victims and guide them to convert their cash into crypto, which gets transferred into their fake platforms, and by the time victims try to cash out their “profits”, the funds are gone.

6. Clone apps

Fake apps or websites mimic legit apps used in making investments (exchange tokens, wallets, trading apps) down to every small detail, with slight differences in URLs, request passkeys, or the apps are downloaded via links or a fake Play Store. The moment victims deposit money (which is usually in the form of crypto), money is lost.

7. Impersonation

Scammers impersonate or pretend to be an organization or an individual to scam people. More often, they impersonate government organizations or close relatives of the victims. They never communicate in person but only via phone calls, texts, social media, etc. Scammers use voice cloning and AI deepfakes to deceive victims.

Legal Loopholes

One of the reasons these scams continue to flourish is not the absence of laws, but the lack of consistency in how they are applied. Regulation struggles to keep pace with technology, while enforcement remains slow, fragmented, and often confined by national borders.

Legal loopholes are technicalities that allow individuals or organisations to exploit and benefit themselves without technically breaking the law. Two industries that are most difficult to regulate are technology and crypto, which are volatile industries with billions invested. Both require global cooperation, stricter regulation, and even consumer protections, but global cooperation regarding financial issues, at best, is difficult. Together, both industries are difficult to regulate, leading to legal loopholes, which scammers exploit.

Japan is one of the first countries to accept cryptocurrencies, and in 2023, the Financial Services Agency (FSA) limited the issuance of crypto via licensed banks only. In 2021, China banned cryptocurrency, but in 2024, the European Union (EU) brought the European Union’s Markets in Crypto-Assets (MiCA) to regulate crypto companies and made the market more predictable to protect consumers. Whereas, in 2018, India initially banned banks from cryptocurrency, but the Supreme Court of India in 2020 overturned it.

This illustrates the varying standards between different countries in their legal and consumer protection frameworks. Since crypto is inherently ambiguous, undefined, and borderless, scammers may register in countries where crypto is legal, have servers elsewhere, and target investors from countries which have weak and slow law enforcement regarding cryptocurrency.

Legal loopholes also mean a lack of rigid consumer protection, which leads to a lack of transparency in regulations, market manipulations, and insider trading. There is no recovery of the funds lost to a scam, nor do consumers have insurance against losses made. In the end, this causes a burden on law enforcement.

Global case studies and Indian parallels

By the time these scams draw the attention of regulators or investigators, the damage has usually already been done. Savings meant for education, retirement, or family security are gone, leaving victims to navigate complex legal systems with little hope of recovery.

Global case study

“Squid” token was inspired by the popular South Korean series “Squid Game.” Posing as a “play-to-earn cryptocurrency,” where investors buy tokens used in online games and earn more after winning in these games, which can later be exchanged for money.

On 26th October, 2021, it started trading at one cent, but in less than a week, it was trading at almost $3,000; its value jumped by 99.99%. This is where experts warned it to be a “pump and dump” as it did not allow people to resell their tokens. The scammers made an estimated $4 million in a few weeks, and the scam fell apart. The website is reported to have numerous spelling mistakes and grammatical errors; its social media accounts have been taken down by scammers. It was a classical “rug pull” and “pump and dump” scam.

Indian case study

On 26th February, 2025, the Central Bureau of Investigation (CBI) seized ₹23.94 crores from over 60 locations — Delhi, Pune, Kolhapur, Mumbai, Bengaluru, and many more — in the GainBitcoin scam. The scam was launched in 2015 by Amit Bhardwaj (deceased) and Ajay Bhardwaj, promising 10% monthly returns on Bitcoin over 18 months, but in 2017, the scheme fell apart, and payouts initially being made in Bitcoin were switched to an in-house cryptocurrency (which has a significantly lower value), defrauding the investors twice.

CBI found ₹23.94 crores worth of cryptocurrency, multiple hardware crypto wallets, 34 laptops, 12 mobiles, tons of email and instant messaging apps, and 121 documents. Considering how the scam initially fell apart in 2017 but was investigated in 2025 shows how difficult it is for law enforcement to investigate cryptocurrency fraud.

For many investors, the loss was not limited to money. Trust in financial systems eroded, families faced long-term instability, and victims reported deep reluctance to engage with any future investment opportunities, even legitimate ones.

Common characteristics of such scams

1. High returns with no risks, and consistent high returns

2. Complex and niche terminology

3. Fear of missing out (FOMO)

4. Using the seven principles of persuasion

5. Unlicensed sellers and unregistered investments

6. Websites with little information

7. Use of e-currency sites

8. Recruit your friends

   
   

Practical preventative measures

1. Question the methods

2. Properly understand the investment

3. Be wary of unsolicited offers

4. Verify the seller

5. Small test transfers

6. Report or complain to state financial securities regulators

In India, victims of investment, crypto, and online financial scams have several official and civil avenues for help and reporting. Complaints can be filed on the National Cyber Crime Reporting Portal (cybercrime.gov.in), the government’s central platform for reporting cyber and financial fraud, or by calling the 1930 National Cybercrime Helpline, a 24×7 toll-free number that helps victims flag fraud quickly and, in some cases, freeze transactions.

For investment and securities-related scams, grievances can be submitted to the Securities and Exchange Board of India through its SCORES platform. Victims may also register FIRs with local police stations or specialised cybercrime cells. Technical advisories and incident-response guidance are issued by the Indian Computer Emergency Response Team, while large-scale or complex corporate frauds may fall under the jurisdiction of the Serious Fraud Investigation Office.

In addition to government mechanisms, digital-safety initiatives such as DigiKavach focus on detecting and disrupting online financial fraud, while civil-society groups like the Akancha Srivastava Foundation work on cyber awareness, digital literacy, and victim support. Together, these institutions form India’s primary response network for reporting, mitigating, and understanding financial and digital scams.

Investment and cryptocurrency scams persist not because people are careless, but because modern financial systems are opaque, fast-moving, and saturated with hype. As technology evolves faster than regulation, responsibility is increasingly pushed onto individuals, even as scammers operate with scale, organisation, and near impunity.

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