Understanding The Karnataka Bitcoin Controversy One Byte at A Time

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The bit­coin scam that alleged­ly involved kick­backs to police and politi­cians in Kar­nata­ka con­tin­ues to be an alba­tross around the state government’s neck. Priyank Kharge, a for­mer Con­gress min­is­ter who in a tweet claimed that the FBI had land­ed in India to con­duct inves­ti­ga­tions on the mul­ti-bil­lion bit­coin scam, stuck to his stand that the Amer­i­can agency was indeed on Indi­an soil.

“Why is the CBI shak­en up by my tweet? My sources told me the FBI is in India and I tweet­ed the infor­ma­tion that I had con­firmed. By issu­ing a state­ment suo-moto clear­ly shows they have some­thing to hide. My sources have con­firmed to me that the FBI are in touch with the Min­istry of Exter­nal Affairs (MEA ), but I can­not reveal any­thing more,” the Con­gress MLA told News18.

On Sun­day, the Cen­tral Bureau of Inves­ti­ga­tions (CBI) issued a media state­ment clar­i­fy­ing the US law enforce­ment agency FBI “has not sent any team to India for con­duct­ing a probe in the mat­ter nor has any request been made by FBI to CBI for con­duct­ing inves­ti­ga­tion in this case in India”, once again bring­ing to focus the bit­coin con­tro­ver­sy that has rocked Kar­nata­ka pol­i­tics since Novem­ber 2021.

While the rul­ing BJP reject­ed the accu­sa­tions, stat­ing that the police inves­ti­ga­tions con­tin­ue, the oppo­si­tion Con­gress has alleged that the cen­tral and state inves­ti­gat­ing agen­cies have been with­hold­ing infor­ma­tion on the issue as it may involve BJP lead­ers as well. Chief min­is­ter Basavaraj Bom­mai had even met Prime Min­is­ter Naren­dra Modi over the issue but lat­er issued a state­ment say­ing the PM had asked him to ignore the allegations.

On Fri­day, Kharge claimed the FBI is in Del­hi to inves­ti­gate the “bil­lion dol­lar #Bit­Coin­Scam” and said “a lot of BJP’s skele­tons will tum­ble out” if the mat­ter is probed properly.

Soon after, senior Con­gress leader Ran­deep Singh Sur­je­w­ala posed sev­er­al ques­tions to Union Home Min­is­ter Amit Shah and CM Bom­mai on the issue.

The CBI’s clar­i­fi­ca­tion came after Con­gress lead­ers includ­ing Sur­je­w­ala and for­mer Kar­nata­ka chief min­is­ter Sid­dara­ma­iah retweet­ed Kharge’s post and dared BJP lead­ers includ­ing Bom­mai to come clean.

Kar­nata­ka BJP spokesper­son Capt Ganesh Karnik hit back at the Con­gress, say­ing the par­ty is des­per­ate­ly try­ing to rake up an issue to remain part of the news cycle.

“I con­demn their obser­va­tion on the bit­coin issue. Just like the Con­gress has no weigh­tage in the coun­try today, this news also car­ries no weigh­tage. The Con­gress with their 60 years of expe­ri­ence in gov­er­nance, instead of being proac­tive and help­ing us with sug­ges­tions are look­ing for such non-issues to cre­ate news. The Con­gress’ con­nec­tions with inves­ti­gat­ing agen­cies like the FBI, KGB in erst­while USSR, are well known,” Karnik told News18.

“Bit­coin is being dis­cussed in Par­lia­ment and some­thing is com­ing out at the nation­al lev­el. We should wait to see the results instead of knee-jerk reac­tions,” he added.

The bit­coin scam hit the head­lines around Novem­ber 2021 after Ben­galu­ru police arrest­ed an inter­na­tion­al hack­er called Srikr­ish­na or “Sri­ki”. The accused in his vol­un­tary state­ments to the police revealed sev­er­al of his finan­cial exploits — hack­ing into the cryp­tocur­ren­cy exchange Bitfinex twice, rig­ging pok­er sites, hack­ing into gov­ern­ment web­sites, social media han­dles of the politi­cians and alleged­ly pay­ing bribes to police and politi­cians in the form of bitcoins.

This scam has led to sev­er­al face-offs between the Kar­nata­ka BJP and Con­gress and the pro­ceed­ings of the state assem­bly have been stalled sev­er­al times due to this controversy.

“The CBI is an agency of the BJP. They will say what the gov­ern­ment wants. Why did Bom­mai run to the PM? The FBI has come and it is a mat­ter of time before it will be out. We need to con­nect the dots. The answer is there for all to see. CBI and ED have proved they are pup­pets of PM Modi. Our alle­ga­tions are not base­less,” said Milind Dhar­masen, gen­er­al sec­re­tary, KPCC.

Life and times of Srikrishna— Sriki

At the cen­tre of this mas­sive row is Srikr­ish­na Ramesh, who was first arrest­ed in a drugs case in 2020. As the police probed fur­ther, Sriki’s involve­ment in sev­er­al online crimes was revealed includ­ing hack­ing into the Bitfinex exchange, twice.

Senior police per­son­nel whom News18 spoke to con­firmed that while inves­ti­ga­tions con­tin­ue on the bit­coin issue, it is “rather slow-paced”. After hav­ing ques­tioned Sri­ki over sev­er­al months, the hack­er is under the sur­veil­lance of the top inves­ti­ga­tion agen­cies in the country.

“Bit­coin is a dig­i­tal cur­ren­cy, but in our coun­try, we do not have laws or rules gov­ern­ing this cur­ren­cy. Bit­coin as an asset is okayed by the SC, but as a cur­ren­cy is not per­mit­ted. So if there are some instances where peo­ple are involved in trans­ac­tions and mak­ing mon­ey using bit­coin, it needs to be brought under cer­tain reg­u­la­tions. Very soon we will have reg­u­la­tions in place and that will help ease of inves­ti­ga­tion by the police. With­out a law, how can we book peo­ple like Sri­ki say­ing they have sur­passed it? ” said a senior Kar­nata­ka offi­cial close to the investigations.

The life of Srikr­ish­na Ramesh alias Sri­ki has all the ingre­di­ents for a pot­boil­er film — mys­tery, crime, romance and mon­ey. The infa­mous hack­er at the heart of the mul­ti-bil­lion bit­coin scam has no qualms in flaunt­ing his hack­ing skills and lav­ish lifestyle.

Descent into darkness

In his vol­un­tary state­ment to the police, Sri­ki had con­fessed how he used his hack­ing prowess to fraud gam­ing por­tals, and source drugs from the dark­net using cryp­tocur­ren­cy. He also admit­ted to hack­ing into a gov­ern­ment por­tal in Kar­nata­ka and the social media han­dles of sev­er­al politi­cians and industrialists.

Born on March 30, 1995, Sri­ki at a very young age devel­oped a keen inter­est in com­put­ers, so much so that by the time he was in class 4, he had learnt the basics of cod­ing, JAVA, and reverse engi­neer­ing. He claimed to have pro­grammed his first bot for a game called RuneScape in 2004.

As his inter­est in tech­nol­o­gy deep­ened, Sri­ki began to scour the dark­net. He joined the Inter­net Relay Chat (IRC)— a group of black-hat hack­ers— where he was trained in hack­ing and using the inter­net for mon­e­tary benefits.

In his state­ment, he claimed that when he was in class 8, not only had he become the mod­er­a­tor and admin­is­tra­tor of IRC, but he had also begun men­tor­ing oth­er hack­ers on how to hack finan­cial sites.

Police sources told News18 that Sriki’s cir­cle of friends in school began to grow when he helped them with atten­dance by hack­ing into the stu­dents’ school por­tal Pupilpod.

“I hacked into Pupil­pod and helped change the marks of my class­mates. I col­lect­ed Rs 30,000 per sub­ject and made an over­all sum of Rs 1.5 crore,” Sri­ki said in his statement.

How­ev­er, the lure of mon­ey led to fur­ther­ing his drug and drink­ing habits. By the time he was in his present uni­ver­si­ty, Sri­ki was hooked on both vices and began hack­ing full time to ensure he con­tin­ued his lav­ish lifestyle. He told the Ben­galu­ru Crime Branch that he used to import drugs for per­son­al con­sump­tion from the dark­net mar­ket from a per­son by the name ‘Ross Ulbricht’. He con­tin­ued to order drugs from the same per­son for the next 2 years, which were cleared by customs.

It was dur­ing this time that he devel­oped an inter­est in bit­coins and began work­ing on the dark­net to col­lect the cryptocurrency.

Sriki’s state­ment speaks of how he befriend­ed an Aus­tralian hack­er named Shane Duffy who had the expe­ri­ence of hack­ing into Pay­pal accounts. Both joined hands to buy RuneScape accounts and play with the cryp­to mon­ey on a gam­ing site called Scythe.

By the age of 17, Sri­ki left for the Himalayas along with a friend named Rithvik. His Himalayan vis­its were known only after his par­ents filed a miss­ing com­plaint and he was traced to a hotel near Mathu­ra and brought back to Ben­galu­ru. On the insis­tence of his par­ents, Sri­ki joined an engi­neer­ing course, but his love for hack­ing and bit­coin remained in-sati­at­ed. He expand­ed his dark­web busi­ness and began cre­at­ing his own net­work of bit­coin traders and hackers.

He left for Ams­ter­dam to pur­sue a degree course in com­put­er sci­ence where he met a dri­ver named Walid Attad­loui. This dri­ver grew close and soon both began trav­el­ling across Ams­ter­dam to deal in cash and cryp­to exchanges. Inter­est­ing­ly, Sri­ki in his state­ment claims that Walid broke into his house one day and stole mon­ey, a pass­port, two lap­tops and a hard dri­ve. Though Walid was arrest­ed, the police could not find Sriki’s lap­tops in which he claimed to have had $3 mil­lion in bitcoins.

Broke, frus­trat­ed and rar­ing to hack again, Sri­ki, with the help of his fel­low hack­ers, was goad­ed to break into the Bitfinex exchange in 2015. He struck gold, quite lit­er­al­ly, and made a prof­it of 2,000 bit­coins, esti­mat­ed to be worth around Rs 1.5 crore. He lat­er claimed to have splurged the cryp­to mon­ey on a lav­ish lifestyle at five-star hotels and drugs.

Sri­ki decid­ed to return to India in 2015 and for the next three to four years con­tin­ued to hack into bit­coin exchanges and gam­bling web­sites. In the vol­un­tary state­ment, Sri­ki claimed that he hacked the Twit­ter accounts of Rahul Gand­hi, Barkha Dutt and oth­er high-pro­file peo­ple in 2016. He talked of mov­ing more than 80,000 euros from cold wal­lets in India to Europe. His hack­ing itch over­pow­ered him again and he hacked into CCI Pana­ma, an off­shore host­ing web­site, as well as the Bit­club net­works serv­er, from where he with­drew around 100 BTC.

“Bitfinex was my first big bit­coin exchange hack. The exchange was hacked twice, and I was the first per­son to do so. The sec­ond instance was a sim­ple spear-phish­ing attack which led to two Israeli hack­ers work­ing for the army get­ting access to the com­put­ers of one of the employ­ees, which gave them access to the AWS cloud account,” he said in his state­ment to the police.

“I exploit­ed a bug in the data cen­tre which gave me KVM (Ker­nel-based vir­tu­al machine) access to the serv­er. I reboot­ed the serv­er into GRUB mode, reset the root pass­word, logged in, and reset the with­draw­al serv­er pass­words and rout­ed the mon­ey via bit­coin to my bit­coin address,” he said.

Dirty games

A senior police offi­cer close to the inves­ti­ga­tions told this reporter that Sri­ki used to hack into gam­bling web­sites like a PPok­er Club for his friends.

“He would hack into the sys­tem and show the hand to the friend who was play­ing and make a tidy prof­it. He excit­ed­ly told us how he made Rs 2 crore from the PPok­er Club and lat­er blew the mon­ey on a lav­ish lifestyle,” the offi­cer said.

Sri­ki also claimed to have hacked a gam­bling site called Pok­er Baazi and trans­ferred Rs 70 lakh from the bank account. “His involve­ment in the infa­mous Ben­galu­ru pub brawl case is also being inves­ti­gat­ed where he, along with the Con­gress MLA NA Haris’s son Mohammed Nala­pad went abscond­ing. He prides him­self on hack­ing the Kar­nata­ka government’s e‑procurement (ten­der) and syphon­ing off around Rs 11 crore in 2019, all while sit­ting in a sev­en-starred hotel in the Himalayan ranges,” the offi­cer added.

While the hack­er has syphoned, trans­ferred and spent mon­ey, cash and cryp­tocur­ren­cy, he does not own a bank account. He told the police that all trans­ac­tions would be done through the account of a friend called Robin who helped him con­vert bit­coins to currency.

Sri­ki and Robin met on bitcoin.com in 2017 while sell­ing the cryp­tocur­ren­cy. They helped each oth­er by sell­ing bit­coins and using Robin’s account for transactions.

“Their part­ner­ship was very suc­cess­ful and they made close to Rs 6 crore via BTC. Sri­ki also would ask Robin to sell Ethereum and take a com­mis­sion for it, the offi­cer said.

But it’s the Bitfinex heist that has been the high­light of Sriki’s hack­ing pro­file. While Sri­ki claims to have spent all the mon­ey earned through his mon­ey heists on his lifestyle, polit­i­cal par­ties, rul­ing and oppo­si­tion in Kar­nata­ka have been sling­ing accu­sa­tions at each oth­er alleg­ing that bribes were paid in bit­coins by Sri­ki to the police and influ­en­tial per­sons in the gov­ern­ment after his arrest in Novem­ber 2020.

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