The Delhi High Court on Monday denied bail to a man accused of being part of a fraudulent cryptocurrency racket through a platform called Pluto Exchange, while observing that cryptocurrency has profound implications on the country's economy [Umesh Verma vs State].

Justice Girish Kathpalia observed that investments in cryptocurrency may lead to recognised money disappearing into unknown channels. Such economic crimes lie on a different footing when it comes to the grant of bail, the Court said.

“Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. For, economic offences, unlike most conventional bodily offences, are committed with elaborate planning and expertise. Especially, dealing in crypto currency has profound implications on economy of our country by way of dissolution of recognised money into the dark unknown and untraceable money," the July 14 ruling said.

In the present case, the High Court noted that, prima facie, the accused had duped 61 gullible investors by painting a “rosy picture” that they would get 20-30 per cent returns on their investments in cryptocurrency on a monthly basis, even after the derecognition of cryptocurrency in India. This showed his malafide intent, the Court opined.

It also rejected the accused man's contention that he was not a flight risk and his argument that he was trying to settle the matter by paying back investors in full.

Notably, the Court concluded that the accused bail applicant had been trying to drag out mediation proceedings initiated to settle the investors' claims, so that he could continue to remain on interim bail.

"I find substance in the argument of learned prosecutor that the accused/applicant used the mediation process as a tool to create artefact of bona fide, which led to his interim bail and thereafter he continued to ensure that the settlement process goes endlessly and he evergreens the interim protection," the Court said.

The case concerned a complaint filed with the Economic Offences Wing (EOW) against Umesh Verma and others who operated a crypto exchange platform named Pluto Exchange.

The accused persons were alleged to have lured several victims into investing in a Dubai-based company named Bharat Umesh General Trading LLC, which dealt in cryptocurrency.

Based on this assurance, the complainant invested ₹5 lakhs, which was ultimately not returned to him. Upon enquiry, the complainant learnt that the accused persons had shifted to Dubai. 

Umesh Verma was arrested in 2020 in this case. He approached the High Court for bail in 2022, after a sessions court rejected his plea. He also urged the High Court to quash the case against him.

During the High Court proceedings, he proposed to pay back investors in full, adding that he never had any dishonest intentions in his activities.

In 2023, a settlement was reached with a few investors through the Mediation Centre of the Delhi High Court. Based on this settlement, the accused was released from prison on interim bail, on the condition that he settle payments due to all remaining investors. Such an arrangement was allowed when the matter was being heard by another High Court Bench.

However, the matter was later posted before Justice Kathpalia, in April this year. Justice Kathpalia opined that bail proceedings could not be turned into money recovery proceedings, and ordered the accused and the State to address the Court on the merits of the bail plea.

"My decision to switch over from the said piecemeal settlement proceedings to adjudication of this bail application on merits is fortified by plethora of judicial pronouncements to the effect that the bail courts are not forum for recovery of money; and that the economic offences constitute a class apart, so need to be visited with a different approach in matters of bail," he reasoned.

Further, Justice Kathpalia also took critical note that several duped investors claimed that the accused had not paid them back. It was found that 38 defrauded investors, out of 61 investors, were not paid their money back.

Moreover, the number of investors who came forward to claim that they had been duped rose from 48 to around 61 during the High Court proceedings. That State added that there were 13 more such additional victims.

“The allegations against the accused/applicant in this multi-victim scam are quite serious, more so in the light of his antecedents of involvement in as many as 13 more cases of similar nature, list whereof is on record and not challenged by the accused/applicant,” the Court stated.

The Court, therefore, decided to reject the bail plea considering the complexity and expanse of the economic crime, the accused's decision to continue collecting crypto-investments even after it was de-recognised in India and his "blatant misuse of the mediation system."

The Court also factored in that the accused appeared to be a flight risk and that the investigation had led to more victims coming forward claiming that they too had been duped.

“The accused/applicant, who is on interim bail granted by the predecessor bench, shall surrender before the IO or the trial court forthwith,” the Court ordered, after rejecting the accused man's bail plea.

Senior Advocate Raj Shekhar Rao, with Advocates Tarun Gaur, Vishakha Gupta and Shubham Arora, appeared for the accused. 

Additional Public Prosecutor Ritesh Kumar Bahri, with Advocates Divya Yadav, appeared for the State. 

[Read judgment]