The Founder of India-Based Bitcoin Mining Pool GBMiners is Running a Ponzi Scheme

The Founder of India-Based Bitcoin Mining Pool GBMiners is Running a Ponzi Scheme

By Kyle Torpey - min read
Updated 22 May 2020

Update: This post has been updated with a response from Amit Bhardwaj

GBMiners has made headlines in various media outlets lately due to the bitcoin mining pool accounting for roughly 3 percent of the network hashrate and supporting Bitcoin Unlimited; however, there is a connection between GBMiners and Gainbitcoin, which is a cloud mining operation that is clearly operating as nothing more than a Ponzi scheme.

The connection between GainBitcoin and GBMiners is Amit Bhardwaj, who is involved with both projects.

At this time, it’s unclear if the hashpower pointed at the GBMiners mining pool comes directly from Gainbitcoin, but Bhadwaj is known to be responsible for the vast majority of the mining pool’s hashrate.

Many bitcoin cloud mining schemes have turned out to be Ponzi schemes over the years, and GainBitcoin is no different. The combination of a cloud mining scam with a mining pool has drawn comparisons to Bitclub Network.

GainBitcoin Promises 10% Gains Per Month

Gainbitcoin guarantees a 10 percent return on investments into their cloud mining scheme per month. This 10 percent return per month rate has no basis in reality.

On the Gainbitcoin website, a 1.5TH/s mining contract is available for the price of one bitcoin. This means that the contract should earn buyers 0.1 bitcoins per month. According to the CoinWarz bitcoin mining calculator, 1.5 TH/s should earn less than 0.04 bitcoin per month.

Additionally, buying the same amount of hashpower from Genesis Mining, which is one of the few bitcoin cloud mining companies that hasn’t turned out to be a scam of some kind, costs $225—roughly a quarter of the price quoted by Gainbitcoin.

The investment claims made by Gainbitcoin are even more absurd when considering the fact that a cloud miner isn’t going to receive the full amount of income from their equipment without any expenditures. Gainbitcoin also heavily relies on a referral process. Bhardwaj mentions Gainbitcoin’s use of multi-level marketing in a video posted on YouTube.

There seems to be no logical reasoning behind the price of cloud mining contracts on Gainbitcoin. Prices for the contracts are denominated in bitcoin, and they haven’t changed at all since early 2016 even though the US dollar price of bitcoin essentially doubled over that period of time.

Returns on cloud mining contracts also don’t seem to have been affected by the halving event from the past summer either. Block rewards were halved, but cloud mining contracts purchased through Gainbitcoin continued paying the same rates.

Contracts that used to cost 100 bitcoin are now discounted to 86 bitcoin until March. This sort of discount has no basis in reality, and is often used by cloud mining Ponzi schemes to make sure money keeps flowing into the scam. A similar strategy was used by a cloud mining scam that was exposed in 2015.

Payouts for cloud mining contracts are sent out twice per month. If earnings are immediately reinvested into the cloud mining scheme, Gainbitcoin is basically claiming that 86 bitcoins can be turned into 309 bitcoins over the course of a year via the discounted offering.

There is a thread on where users have been investigating the claims made by GainBitcoin.

CoinJournal has not found any evidence that Gainbitcoin has missed any payments yet, although that tends to be the nature of Ponzi schemes at first. It’s unclear how much money has been put into the Ponzi scheme at this time.

Zebpay Warns Against Bitcoin Cloud Mining Scams

In a recent video posted on their Facebook page, Indian bitcoin exchange Zebpay warned their customers against the various cloud mining schemes that have become popular in India.

“We are aware that there are one or two alleged bitcoin mining schemes, which are extremely popular in India,” said Zebpay COO Sandeep Goenka. “These mining schemes assure a fixed return in bitcoin, and some of them promise returns as high as 10 percent of the bitcoin investment per month. We are absolutely sure that this is not possible in mining. We are sure that no mining scheme can guarantee a fixed mining return. We are sure that these are scams. We want to warn our users against investing in these mining schemes.”

“In absolutely clear words, we want to warn our users against investing in these bitcoin mining schemes which assure any kind of fixed return. In our opinion, these are scams,” Goenka reiterated.

Coinbank and Other Ventures

Gainbitcoin investors are also now forced to receive their payouts into a bitcoin wallet associated with Bhardwaj, known as Coinbank. When looking at the wallet’s layout, it’s clearly just a rebranded version of the open-source Bitpay wallet.

According to a post on Bhardwaj’s Linkedin page, Coinbank will soon offer a 1.5 percent monthly interest rate on fixed deposits. “We launched CoinBank, a Bitcoin Bank where you can do fixed deposits and we offer 1.5% per month interest rate on a 6 months fix deposit, which is the highest offered by a bitcoin wallet [or] bank globally,” wrote Bhardwaj.

A 1.5 percent monthly interest rate equates to a 20 percent return for investors per year when earnings are reinvested at the end of each month, which is another extraordinary claim—albeit not as amazing as the gains that are supposedly coming to Gainbitcoin investors.

GBMiners was built out of a partnership between Bhardwaj and Darwin Labs. In addition to GBMiners, Coinbank and something called the Bitcoin Growth Fund are also listed as technology partners on the Darwin Labs website.

Darwin Labs is also behind Satoshi Studios, which is said to be an incubator for blockchain startups in Southeast Asia. Amit Bhardwaj is listed as an investor on the incubator’s website alongside longtime bitcoin angel investor Roger Ver. Ver told CoinJournal that he has not yet committed any funds to Satoshi Studios.

CoinJournal has reached out to Darwin Labs CEO Sahil Baghla about the topics covered in this article. Baghla has decided not to comment.

Update: CoinJournal has received answers to questions sent to Bhardwaj. Bhardwaj’s answers have been edited for formatting purposes.

CoinJournal: Gainbitcoin’s prices are denominated in bitcoin. Why did the prices not change when the bitcoin price in US dollars roughly doubled in 2016?

Bhardwaj: Because the internal base price for Gainbitcoin is in BTC. Purchase and produce both are in BTC. So actual change in BTC price economics doesn’t impact the overall business.

CoinJournal: Why do your cloud mining contracts cost four times as much as the same amount of hashing power on Genesis Mining?

Bhardwaj: The price updates for contracts are done once in 6 months time frame. Gainbitcoin don’t use dynamic pricing structure as even the output for users is not dynamic. Genesis Mining is genuine as per your take, but I can surely find a lot of disgruntled customers because of wrongful information passed to them In all practical sense generic customer doesn’t have enough information to choose the right mining contract. In case of Gainbitcoin, it’s users are included in the ecosystem with a positive response and not left on their own judgement; leading to better inclusion in the ecosystem.

CoinJournal: Why does the mining calculator on Gainbitcoin project 0.1 btc earned per month for 1.5 th/sec when a normal mining calculator says 1.5 th/sec should provide 0.04 btc per month?

Bhardwaj: Bitcoin mining calculators are good for people who want to run their own mining setup, and I assure you not good for cloud mining chaps. Whenever we get a chance to interact one to one I’ll personally explain u the maths behind Gainbitcoin successful pattern for the user gains. It’s very simple, only cloud mining people makes it too complex.

From CoinJournal’s perspective, saying things like the price of bitcoin does not impact a bitcoin mining business only confirms the fraudulent nature of the business.