We meet up with Advocate A M IKTEAR UDDIN popularly known as Advocate Anik, the cybercrime lawyer and Managing Partner of Prime Legal also special public prosecutor to discuss the increasing cases in cryptocurrency fraud in India. Advocate Anik also provides guidance on legal remedies available and what practical steps victims can take.
A. Is it legal to trade in cryptocurrency in India?
Crypto currency is definitely not a legal tender as on date, but trading and investment in the digital currency regulated and with no outright trading ban. Cryptocurrencies are considered Virtual Digital Assets (VDAs) and not accepted as legal tender, which is the Indian Rupee, though legally they can be traded or held as an asset.
i) VDAs are already recognised under the Income Tax Act 1961, which lays out a flat 30 per cent tax on earnings from trading in cryptocurrencies and a one per cent Tax Deducted at Source (TDS) on certain transactions.
ii) In 2020, Supreme Court of India lifted Reserve Bank of India’s 2018 ban on cryptocurrencies by restoring banking and exchange trading access. Currently there is no official ban on cryptocurrency trading in India.
iii) Cryptocurrency exchanges and service providers will need to register with the Financial Intelligence Unit-India (FIU-IND) and adhere to Know Your Customer (KYC) as well as Anti-Money Laundering (AML) rules, strengthening regulatory oversight.
iv) Government seeks to keep consultation with all stakeholders and consideration of laws in developing the framework, letting regulator SEBI regulate tokens like securities for issuer specific instruments and laws from the finance ministry.
v) Trading platforms are also subject to an 18 percent Goods and Services Tax (GST) for their service fees from 2025.
B. How is Cryptocurrency Fraud Defined in India?
According to advocate Anik, the most commonly seen type of cryptocurrency scams consist of a number common types that he breaks down here:
i) Ponzi Schemes: These schemes claim to offer high, stable returns on investment but instead use new investors’ payments to compensate earlier investors rather than a genuine investment profit. The plan depends on continually adding new investors, which means the scheme crashes as soon as fresh money disappears.
ii) Phishing scams: Scammers convince victims to disclose their private keys, login credentials or even personal information using counterfeit websites, emails and can further extend to social networks from which they look completely genuine. This purloined information is then employed to drain the cryptocurrencies from victims’ wallets.
iii) Fake ICO’s: A scam where companies offer fake crypto tokens in ICOs with the promise to a high return on investment. Investors purchase into these ICOs, but the projects are either non-existent or disappear having received funding leading to financial loss.
iv) Exchange Hacking: Hackers will gain unauthorized access to a cryptocurrency exchange or wallet and steal the stored digital assets belonging to investors. These are the types of attacks that take advantage of security gaps to illegitimately access.
v) Cheque/ DD-Based Payment with Post-Transfer Reversal:- Buyer may make a purchase of cryptocurrency using cheques or other similar negotiable instruments. Buyer is able to do whatever they want with a car and 15 secudeds after payment has been made or check deposit bounces. Following a crypto transfer, the fraudster sends checks that bounce at a later date — avoiding instant arrests for cybercrime.
All of these types of fraud result in significant monetary loss and legal complications for those caught in their wake.
C. What are the Key Legal Provisions Addressing Cryptocurrency Frauds in India?
In India, they are tackled with under the Bharatiya Nyaya Sanhita (BNS), Information Technology Act for cyber-related crimes and the Prevention of Money Laundering Act (PMLA) when proceeds of crime are laundered. An awareness of these different types of fraud can help investors to remain alert and pursue the appropriate legal remedies when necessary.
i) Relevant extracts of the Bharatiya Nyaya Sanhita (BNS), 2023, which has superseded the Indian Penal Code (IPC) as India’s principal criminal law. BNS includes cheating, dishonesty, financial scams and defines Ponzi schemes and cybercrimes related to cryptocurrencies as organized crime.
ii) The IT Act 2000, and in particular sec 66 C & D for identity theft under IT act and cheating by personation usign computer resources or digital devices.
iii) Money laundering under the Prevention of Money Laundering Act (PMLA), 2002.
D. How to Avoid Cryptocurrency Fraud in India
Be careful of unexpected offers, promises of extremely high returns of something, rush to make quick decisions, and also lack of transparency on the platforms or individuals involved. Identification of these warning signs and also evading them are extremely important for your own safety. Most importantly, always know whom you are handling before you invest, as recovering of losses from blockchain transactions is almost impossible.
Rephrased:
E. What are a victim’s legal remedies if they’re the target of crypto-related bullying or scamming?
i) consult with a cyber crime legal lawyer. Stop any transaction quickly and change passwords
ii) Report the scam to your exchange or service provider as soon as possible.
iii) Make a detailed complaint with all the details possible (name, wallet’s ID and transaction details) to your nearest cyber crime police station and register the FIR.
iv) Civil recourse may be restricted so difficulty in freezing assets or obtaining an injunctions, however consider an application for interim relief if available but very negligible impact on the recovery.
v) If the fraud pertains to securities, then submit complaint to SEBI; if it pertaining to banking/financial matters write a letter to RBI. PMLA states that the ED can intervene in cases involving international implications.
E. What is your suggestions:-
Act quickly, Preserve what you can, Seek appropriate authorities Keep in mind, as technology continues to advance, the law is doing its best to catch up—being smart and proactive is your strongest support to deal with it.