India’s Virtual Digital Asset (VDA) market has seen rapid growth, accompanied by increasingly evolved forms of financial fraud. In the absence of a comprehensive legal framework for cryptocurrency, courts rely on existing statutes and judicial interpretation to address these cases. This article examines recent key cases, emerging legal trends, and the regulation of cryptocurrencies in other countries.
Understanding Crypto Scams in India
Crypto scams in India often promise high returns through Ponzi and pyramid schemes. These schemes attract criminal liability under existing Indian law, regardless of the technological medium used. Circulation-based investment models fall within the scope of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. This 1978 Act prohibits schemes that promise quick or easy money based on enrolment or continued participation. Notable cases include GainBitcoin Fraud, in which investors were lured by promises of monthly returns, and Morris Coin, which involved a fake token promoted at events.
In addition to high-profile cases, Indian law enforcement frequently encounters fraudulent trading applications, dashboards displaying fictitious profits, and “pig-butchering” scams, in which individuals are deceived into purchasing cryptocurrency and transferring it to fraudulent wallets.
Despite limited regulation, most crypto frauds are prosecutable under existing laws:
- Section 318, the Bharatiya Nyaya Sanhita (BNS), 2023: Cheating by fraudulent inducement, including digital assets.
- Section 316, the Bharatiya Nyaya Sanhita (BNS), 2023: Criminal breach of trust by misappropriation of investor funds.
- Sections 66C & 66D, the Information Technology Act, 2000: Offences involving false digital identities and unauthorised access.
- Section 3, the Prevention of Money Laundering Act, 2002: Money laundering via cryptocurrency, subjecting assets to attachment and confiscation.
Key Indian Court Cases
The following rulings show how judges are applying traditional laws to technology-driven crimes.
1. Gain Bitcoin Case: Multi-State Ponzi Investigation
Ajay Bharadwaj v. Union of India, Writ Petition (Criminal) 231/2019, Supreme Court
The GainBitcoin scheme defrauded thousands of investors of several hundred crores via fabricated mining contracts. Since police reports were filed in several states, the Supreme Court transferred the investigation to the CBI to ensure consistency and avoid different approaches. At the same time, the Enforcement Directorate is conducting its own investigation under the PMLA.
The Supreme Court held that VDA transactions conducted through foreign intermediaries fall within the scope of domestic anti-money laundering statutes. The Court noted that recovering assets sent overseas is difficult and encouraged agencies to use blockchain forensics more often. Special PMLA Courts also said that crypto Ponzi schemes are carefully planned scams, so stricter questioning is needed to trace wallets, seed phrases, and international transfers.
Regarding the admissibility of blockchain forensics, courts require such evidence to meet ordinary standards under the Bharatiya Sakshya Adhiniyam, 2023. The prosecution must authenticate hash values and transaction graphs through expert testimony and a chain-of-custody analysis.
2. Morris Coin Scam: Fake Token and Layered Laundering
Abdul Gafoor @ Kunhumon v. Directorate of Enforcement, 2022:KER:24038, High Court of Kerala
The Morris Coin scheme used a fake cryptocurrency that was promoted throughout Kerala. The Enforcement Directorate stated that the perpetrators moved investors’ money through shell companies and spent it on cars, real estate, and other assets.
The Court found that creating a fake token and soliciting investments constitutes cheating, even if the token is digital. It also agreed that converting fiat currency into cryptocurrency can be a means of money laundering, not merely a loophole. The Court allowed the seizure of luxury assets and properties because they were linked to the crime.
3. Delhi HC’s Rejection of Bail in Crypto Fraud
Umesh Sharma v. State, 2025:DHC:5548, High Court of Delhi
In 2025, the Delhi High Court refused bail to a person accused of promising 20-30% monthly returns through a crypto investment scheme and then misusing investor funds.
The Court compared crypto fraud to major economic crimes, saying it could disrupt financial systems. It stressed that digital assets can be altered or moved instantly, making it easier to tamper with evidence. Due to the hard-to-trace and complex nature of crypto scams, the Court said stricter bail rules are needed to protect investigations.
4. Madras High Court: Cryptocurrency as Property (WazirX Case)
Rhutikumari v. Zanmai Labs Pvt. Ltd., 2025:MHC:2437, High Court of Judicature at Madras
After a cyber attack on WazirX, the exchange froze the petitioner’s XRP holdings. As the exchange sought to use the user’s assets to cover the losses, the petitioner approached the Court to protect her assets.
The Madras High Court decided that cryptocurrency is “property” that can be owned, transferred, and protected under Indian law. The Court stated that exchanges have a duty to act in users’ best interests and cannot transfer user funds without permission. It granted an order to protect the petitioner’s tokens. The Court also considered UK and New Zealand cases, aligning India with the global view of cryptocurrency as intangible property.
5. Supreme Court: Court as “Polished Hawala”
Shailesh Babulal Bhatt v. State of Gujarat, Special Leave Petition (Criminal) 4036/2025, Supreme Court
The Supreme Court held that the lack of a dedicated cryptocurrency regulatory framework does not exempt crypto-related conduct from criminal liability under existing statutes. The Court further observed that unregulated cryptocurrency systems may facilitate serious economic offences and emphasised that the development of crypto regulation is the exclusive prerogative of the legislature.
The Court criticised the government for imposing taxes on virtual digital assets without ensuring adequate investor protection, characterising this approach as inconsistent. In its orbiter dicta, the Court observed that unregulated cryptocurrency could function as a “polished form of hawala.” The Court cautioned that the borderless nature of cryptocurrency enables transactions to circumvent banking regulations and facilitates money laundering, terrorist financing, and organised crime. The Court urged the government to establish clear rules to prevent misuse.
Impact of These Judgments
Courts have shifted from debating the legality of cryptocurrency to applying existing laws to specific crimes. In IAMAI v. RBI (AIR 2021 SC 2720), the Supreme Court overturned the RBI’s 2018 banking ban as too harsh but confirmed that regulators can oversee crypto markets. Since then, courts have held that crypto transactions must comply with the BNS, PMLA, IT Act, FEMA, and VDA tax rules.
For enforcement agencies, recognising crypto as property strengthens asset-freezing and attachment under the PMLA. Indian authorities use MLATs and Letters Rogatory to request wallet freezes and data from foreign exchanges, but enforcement is limited in cases involving non-custodial wallets and decentralised protocols. Courts may compel the disclosure of private keys or the targeting of fiat on- and off-ramps, but cannot directly seize protocol-level assets.
For crypto exchanges, the WazirX decision means they must act in users’ best interests by maintaining clear custody practices, being transparent, and implementing robust cyber security measures. For investors, recognition of crypto as property improves prospects for asset recovery, though challenges remain with foreign wallets and instant transfers.
Comparative Perspectives
Internationally, jurisdictions such as the United Kingdom and New Zealand have established clear legal standards for crypto assets. In the UK, cases like AA v. Persons Unknown [2019] EWHC 3556 (Comm) recognise crypto as intangible property and allow proceedings against “Persons Unknown” under the Civil Procedure Rules, enabling injunctions and freezing orders even when fraudsters remain unidentified.
New Zealand adopts a comparable approach, as demonstrated in Ruscoe v. Cryptopia [2020] NZHC 728, in which cryptocurrencies were classified as trust property, thereby allowing victims to assert proprietary claims in insolvency and fraud cases.
The United States, by contrast, relies less on civil procedural innovation and more on enforcement-led regulation through agencies such as the SEC and CFTC. These agencies actively pursue fraudulent token sales, market manipulation, and unregistered trading platforms.
The UAE integrates regulatory clarity with judicial enforcement. Dubai’s VARA and the federal SCA set licensing and AML/KYC requirements, while courts recognise crypto as property and issue freezing orders in fraud cases.
Compared to India, these jurisdictions benefit from precise procedural mechanisms and regulatory certainty, reducing ambiguity for investors and enforcement agencies.
Way Forward
India should clarify laws, strengthen institutions, and hold the crypto industry accountable. A dedicated law for virtual assets is needed to address licensing, investor protection, exchange duties, cyber security, and complaint mechanisms, while working alongside existing statutes without overlap.
Law enforcement requires blockchain forensic tools, specialised training, and international cooperation. Exchanges should adopt global best practices, including proof-of-reserves audits and robust incident response plans. Digital literacy and prompt reporting of scams via the National Cyber Crime Reporting Portal or helpline are essential.
Indian courts have played a pivotal role in shaping early crypto law, demonstrating that innovation must comply with legal standards. The coming years will reveal whether India can balance consumer protection, market fairness, and technological advancement.