Delhi Court mandates the Investigation of a Cryptocurrency Fraud on a Complaint by a Bitcoin Seller

Recently, it was reported that the Delhi High court ordered Moti Nagar Police to lodge an FIR against a cryptocurrency fraud and to commence the investigation of the matter in detail. This has alarmed the ones involved in cryptocurrency transactions and the intermediaries providing such transactions through their portals.

As it is known that there’s no blanket ban on the use of Cryptocurrency in India but such virtual currency transactions must comply with general laws such as PMLA, IPC, FERA, NDPS Act, Tax Laws, and RBI regulations regarding KYC (know your customer), CFT (Combating of funding of terrorism) and AML (Anti-money laundering requirements).

Recently, in the case of, Hitesh Bhatia Vs. Kumar Vivekanand, the Delhi High Court has directed the Moti Nagar police to file an FIR against the Cryptocurrency fraud after the complainant had prayed to the court to direct the police to investigate the matter and lodge an FIR.

 

Background

In an application u/s 156(3) C.r. P.C, the complainant had submitted that he was employed with ‘SMC group’ as a Quantitative researcher and his job profile required him to deal with the buying and selling of bitcoins and that he always took proof of identity before entering into such transactions and paid taxes on the gains. Further, he stated that the accused used to purchase bitcoins from the complainant in return for which the complainant used to transfer bitcoin in his virtual wallet on an online transaction portal, namely ‘Binance’, on several occasions. Further, on July 5th, 2020, the complainant was informed that his bank accounts were frozen and it was held that the bitcoin transactions were illegal and unlawful. Subsequently, the complainant confronted the accused pertaining to the legality of the transaction, upon which, the accused admitted that those transactions were a scam and refused to pay back the Bitcoins that were transferred to him by the complainant. The complainant felt cheated by the accused and sought court intervention.

 

Observations by the Court

The court observed that the right to exercise a trade, business, or vocation under Article 19(1)(g) of the Constitution applies to those involved in legitimate commerce through legitimate intermediaries, and in this case, the complainant was carrying out a legitimate profession but has been created by the accused. Further, the court stated that virtual currency is being accepted as valid payments for the purchase of goods and services and that the traders of virtual currencies carry on an activity that falls under the ambit of RBI. Additionally, the Hon’ble Supreme Court in its decision of Mobile Assn. of India Vs. RBI has also recently set aside the RBI circular dated April 6th, 2018 on the ground of unreasonable restrictions upon exercising the right to carry out a profession under Article 19(I) (g) of the Constitution of India.

The court further directed the police to investigate the matter or any mischief conducted by the complainant and the accused. The court further held that the intermediary, in this case, i.e Binance, must be held responsible for any negligence or involvement in the funding of any illegal transactions through their portal, which has to be investigated in detail.

Further, the action taken report was submitted by the police to the court wherein it was held that the amounts that had been received by the complainant were from different accounts and that he had been a beneficiary in those transactions. Further, it was held by the police that two cybercrime FIRs have already been filed against the accused. The court further held that the accused, complainant and the intermediary might have hands in gloves and this cannot be dodged. Therefore, the police need to have an extremely technical investigation.

It is pertinent to note that merely lodging an FIR does not mean that the accused should be arrested immediately.

After concluding the matter and acknowledging the above-mentioned facts, the court observed that jurisdiction is made out under the purview of sections 179, 180, 182 of C.r. P.C and that the cognizable offenses were committed under sections 403, 411, and 420 of Penal Code, 1860. Apart from this, offenses under the Money Laundering Act, 2002, or under Foreign Exchange Management Act, 1999 have been made. Therefore, the accused’s alleged fraud needs to be thoroughly investigated.

Further, the status of the investigation will be informed on August 6th, 2021.

 

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