Cryptocurrency may be legal but no immunity for defrauding investors: Orissa High Court

The Orissa High Court recently refused to quash criminal proceedings in a cryptocurrency fraud case, observing that legality of crypto trading cannot protect those accused of using it as a front to cheat investors [Umesh Kumar Ramani Vs State of Odisha].

Justice Sanjeeb K Panigrahi said the real issue was whether the accused had used the “facade of cryptocurrency trading” to induce investors through false promises, fake entities and a non-existent digital coin.

“The law does not extend immunity to deceit merely because the medium through which such deceit is practised is not itself prohibited,” the Court said.

The Court was hearing a batch of pleas seeking quashing of criminal proceedings arising from a complaint lodged in November 2024. The complaint alleged that the accused had defrauded an investor of ₹13,540 by creating an account under the name MVC (My Victory Club).

The prosecution alleged that the accused created a fake company called Digi Mudra Connect Pvt Ltd and promoted a digital coin named SIITO. Investors were allegedly told that SIITO would be listed on major cryptocurrency exchanges, including Binance.

It was also alleged that money was collected through bank accounts as well as Google Pay and PhonePe numbers linked to the accused.

The State claimed that the case was not limited to one investor. It alleged that over ₹5 crore had been collected from investors across multiple districts. It further said that one of the accused earned commission of ₹1.5 crore and acquired assets from the proceeds.

The accused argued that they were merely agents who promoted cryptocurrency investments on the instructions of senior company officials. They said investors had entered the market knowing the risks and could not invoke criminal law only because they suffered losses.

They also relied on judgments recognising cryptocurrency as a virtual digital asset.

However, the Court said that this argument would not help the accused at the quashing stage.

It said the prosecution was not based on mere promotion or trading of cryptocurrency. Rather, the allegation was that cryptocurrency was used as an instrument to deceive investors and collect money, the Bench said.

“Even a legally permissible business activity may attract criminal liability, if it is employed as a cloak for fraudulent conduct,” the Court observed.

The Court also said economic offences must be viewed seriously because they corrode public confidence in financial systems.

It added that whether the accused were only agents or active conspirators was a disputed question of fact. Such questions would require examination of financial transactions, electronic records, witnesses and surrounding circumstances during trial, the Bench said.

Advocate Soumya Ranjan Das appeared for the petitioners

Additional Standing Counsel Sarita Moharana appeared for the State.

[Read Judgment]