2021 (10) TMI 1070 - HC - Indian Laws

Bail application denied in cryptocurrency fraud case highlighting public interest impact and financial losses

The application for bail was dismissed by the court due to the serious nature of the allegations involving fraud and cheating in a cryptocurrency chit ... Seeking grant of Bail - trading in crypto currency - collection of huge amounts from gullible investors - assured returns were not given to the investors - Breach of Trust - HELD THAT:- Without any observations on the merits or demerits of the trial that would take place, in as much as, the charge sheet has already been filed, the factum that the applicant indulged in the trade of crypto currency despite public notices dated 24.12.2013, 01.02.2017, 05.12.2017 issued by the RBI as also issued on 06.04.2018 cautioning users/holders and traders of virtual currency including bit coins regarding various risks associated in dealing with such virtual currencies with regulated entities already providing such services having been called upon to exit the relationship within three months from the date of the circular dated 06.04.2018 bearing DBR.No.BP.BC.104/08.13.102/2017-18, copy of which is annexed as Annexure-F to the present application, coupled also with the aspect that in view of the associated risks, it was decided by the RBI with immediate effect vide circular dated 06.04.2018 that the entities regulated by the RBI would not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs and that such services included maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transferring/receipt of money in accounts relating to purchase/ sale of VCs with the transactions entered into by the applicant, coupled with the aspect that apart from the investments received by the applicant prior to the circular dated 06.04.2018, the applicant continued to take investments even after the RBI’s circular dated 06.04.2018 as per the statement of amount invested by complainants along with receipts as submitted by the applicant. Coupled with the factum that after allegedly inducing the complainants to give their hard earned money for investment in the firm Pluto Exchange, the assured returns were not given to the investors with the applicant having closed his office of the Pluto Exchange firm at Connaught Place and having gone away to Dubai apparently admittedly even as per averments made in his application though he has submitted that he was running a gold business, the factum that despite running a gold business, the applicant did not return the amounts due to the complainants, cannot be overlooked and thus, taking into account the allegations levelled against the applicant of he with his associates having duped the complainants allegedly to the tune of ₹ 2.5 Crores in the instant case which relates to an alleged commission of an economic offence, which offences corrode the fabric of democracy and are committed with total disregard to the rights and interest of the nation and are committed by breach of trust and faith and are against the national economy and national interest, whereby a large number of innocent investors have been duped of their hard-earned money, it is not considered appropriate to release the applicant on bail. Application dismissed. Issues Involved:1. Grant of bail on medical grounds.2. Allegations of fraud and cheating under Sections 420, 406, 409, 120B of the Indian Penal Code.3. Evidence against the applicant.4. Applicant's defense and arguments.5. Economic offense and public interest.Issue-Wise Detailed Analysis:1. Grant of Bail on Medical Grounds:The applicant sought bail for two months on medical grounds. The court directed the Superintendent Jail, Delhi, to submit a medical report. The report indicated that the applicant was receiving adequate medical treatment and his condition was stable. Consequently, the court decided to hear the application on merits.2. Allegations of Fraud and Cheating:The applicant, along with co-accused, was accused of running a Crypto Currency chit fund company named Pluto Exchange. They allegedly induced complainants to invest in their firm with promises of high returns (20-30% per month) and extra commissions for bringing in more clients. However, the complainants did not receive the promised returns, and the accused fled to Dubai without returning the invested amounts. An FIR was lodged under Sections 420, 406, 409, 120B of the IPC based on multiple complaints.3. Evidence Against the Applicant:The status report and charge sheet indicated that the applicant and his associates misrepresented facts and induced victims to invest money. The applicant was the authorized signatory of the bank accounts where the victims' money was deposited. The applicant fled to Dubai after collecting the money, and an LOC was opened. He was apprehended at IGI Airport upon returning from Dubai. The charge sheet detailed the amounts deposited by various complainants into the firm's bank accounts, which were operated by the applicant.4. Applicant's Defense and Arguments:The applicant argued that there was no prima facie case of cheating and that the prosecution's case was based on the statements of complainants who had willingly invested in cryptocurrency. He contended that the complainants were aware of the speculative nature of cryptocurrency investments and that the losses were due to market conditions and an RBI circular debaring financial institutions from dealing with virtual currencies. The applicant also claimed that he had not fled to Dubai but was stuck there due to COVID-19 travel restrictions. He asserted that he had communicated with the Investigating Officer and had joined the investigation multiple times.5. Economic Offense and Public Interest:The court noted that the applicant continued to take investments even after the RBI's circular cautioning against virtual currencies. The applicant's actions led to significant financial losses for numerous investors. Given the gravity of the economic offense, which corrodes the fabric of democracy and affects national interest, the court deemed it inappropriate to grant bail to the applicant. The court emphasized that economic offenses are committed with total disregard to the rights and interests of the nation and involve a breach of trust and faith.Conclusion:The application for bail was dismissed. The court highlighted the serious nature of the allegations and the potential impact on public interest, thereby justifying the denial of bail. The decision was made without any observations on the merits or demerits of the trial.