Author: Shruthika. S, Tamil Nadu National Law University
To the Point
The rise of cryptocurrency scams in India reveals a troubling pattern of financial exploitation, particularly in the absence of dedicated crypto regulation. A recent case from Kharghar, Navi Mumbai, where a woman lost ₹1.03 crore including her family’s life savings to an online investment fraud, highlights the vulnerabilities faced by investors in digital asset markets. This article analyses the legal aspects of such frauds, specifically through the lens of the Bharatiya Nyaya Sanhita, 2023 (BNS) and the Information Technology Act, 2000, identifying existing gaps and recommending targeted reforms.
Abstract
This article critically examines cryptocurrency investment frauds in India by focusing on the Kharghar case where a 53-year-old woman was defrauded of ₹1.03 crore. In the absence of regulatory safeguards, scammers often exploit legal grey zones to operate sophisticated digital frauds. While the Information Technology Act, 2000 and the newly enacted Bharatiya Nyaya Sanhita, 2023 provide legal remedies, enforcement challenges persist due to the borderless and anonymous nature of cryptocurrency. The article calls for an integrated legal approach that combines technological enforcement with legislative clarity.
Use of Legal Jargon
Cryptocurrency remains a legally undefined asset in India it is not illegal, yet not legally recognized either. The Reserve Bank of India (RBI) has repeatedly cautioned investors about the speculative and unregulated nature of digital currencies. The legal recourse for victims of crypto fraud lies primarily in general criminal and cyber laws.
The Information Technology Act, 2000, specifically Section 66D, penalizes cheating by personation using electronic means. Under the Bharatiya Nyaya Sanhita, 2023,
Section 318(4) penalizes cheating and dishonest inducement to deliver property
Section 319(2)- Cheating by Personation
Section 3(5) – Application of the BNS to Offences committed abroad,
These provisions, while applicable, are not designed for the sophisticated nature of blockchain-based crimes, which require a more nuanced legal framework.
The Proof
According to credible news reports, a 53-year-old woman from Kharghar was lured by cyber fraudsters into a fake crypto investment scheme via social media platforms. The scammers manipulated her through false dashboards, promises of high returns, and emotional pressure, extracting over ₹1 crore in multiple transactions. When she attempted to withdraw profits, they blocked her.
A case was registered at the Navi Mumbai Cyber Crime Police Station under:
Section 318(4), BNS – Cheating and dishonestly inducing delivery of property,
Section 319(2), BNS – Cheating by Personation,
Section 336(3), BNS- Liability
Section 3(5), BNS – Application of the BNS to Offences committed abroad,
Section 66 C, IT Act,2000- Punishment for Identity Theft
Section 66D, IT Act, 2000 – Cheating by personation using communication devices.
This case not only involved substantial monetary loss but also exposed how digital financial illiteracy and absence of regulatory oversight can ruin lives. It also revealed the challenges faced by law enforcement in tracking and recovering assets through decentralized crypto networks.
Case Laws
Internet and Mobile Association of India v. Reserve Bank of India (2020)
The Supreme Court set aside the RBI’s 2018 circular prohibiting banks from facilitating cryptocurrency transactions, citing disproportionate restriction on trade. However, it also left a legislative vacuum that continues to be exploited.
State of Maharashtra v. Shital Thakur (2022)
In this cyber fraud case involving fake investment schemes, the Bombay High Court acknowledged that digital frauds require enhanced procedural investigation tools and cross-jurisdictional cooperation.
Thaler v. Hirshfeld (2021, USA)
Though focused on AI-generated patent claims, this case is relevant in showing how conventional legal doctrines struggle with emerging technologies. A parallel can be drawn to India’s struggle in legally defining and prosecuting crypto-related offences.
Conclusion
The Kharghar scam is a tragic example of how the promise of digital wealth can quickly turn into devastation in the absence of legal safeguards. While the Bharatiya Nyaya Sanhita, 2023 and IT Act provide basic legal remedies for cyber fraud, these general-purpose laws are not fully equipped to handle the complexities of cryptocurrency crimes.
India needs:
A dedicated cryptocurrency law recognizing digital assets and setting investor protection protocols.
A central regulatory authority to monitor crypto exchanges;
Fast-track mechanisms for investigating and freezing crypto-linked transactions;
Cross-border cooperation for extradition and enforcement in international crypto frauds.
As the legal system evolves to keep pace with technological advances, it must ensure that investor protection is not left behind in the rush toward digital innovation.
FAQS
1. Is cryptocurrency legal under Indian law?
Cryptocurrency trading is not illegal, but it is not recognized as legal tender. There is currently no comprehensive legislation regulating it.
2. What laws apply to crypto investment scams in India?
Crypto frauds are prosecuted under the Information Technology Act, 2000 and the Bharatiya Nyaya Sanhita, 2023 (Sections 316, 312, and 3(6)).
3. Can victims recover money lost in crypto scams?
Due to the decentralized and anonymous nature of cryptocurrencies, recovery is challenging. Prompt FIR registration and collaboration with cybercrime units are critical.
4. Has the RBI regulated cryptocurrency?
The RBI has not banned crypto but continues to caution against it. It supports the introduction of a Central Bank Digital Currency (CBDC) as a regulated alternative.
5. Are reforms expected in this area?
Yes. The government has discussed the Cryptocurrency and Regulation of Official Digital Currency Bill, though it has not been passed yet. Public policy debates continue on how to regulate crypto assets effectively.
