Crypto Fraud Allegations Disclose Triable Issues, No Quashing At FIR Stage: Orissa High Court

The Orissa High Court on 15 May declined to quash criminal proceedings arising out of an alleged cryptocurrency investment scam, holding that allegations of false representations, fictitious entities, and dishonest inducement of investors disclose triable issues that require examination at trial rather than interference at the FIR stage.

A Bench of Dr Justice Sanjeeb K Panigrahi observed:

“Allegations involving organized financial fraud, systematic inducement of multiple investors, and collection of substantial amounts through coordinated mechanisms ordinarily require comprehensive evidentiary examination during trial. The societal impact of such offences often extends far beyond the pecuniary loss suffered by individual complainants. Consequently, Courts exercising inherent jurisdiction are expected to adopt greater circumspection before interdicting prosecutions involving allegations of large-scale financial deception at the threshold itself.”

The petitioners approached the Court under Section 482 CrPC seeking quashing of proceedings arising from an FIR registered in November 2024, which alleged fraud in connection with a cryptocurrency investment scheme.

The complainant alleged that investors transferred funds after being induced through an entity called “My Victory Club (MVC)” and a purported company named “Digi Mudra Pvt. Ltd.”, resulting in financial loss. Police registered offences under the Indian Penal Code, including cheating, forgery and criminal conspiracy, along with provisions of the Information Technology Act.

The petitioners argued that they acted only as agents promoting cryptocurrency investments and bore no role in the alleged fraud. They maintained that investors participated voluntarily with knowledge of market risks, and that the allegations did not satisfy the essential ingredients of cheating or allied offences.

The State opposed the plea, submitting that the investigation had culminated in a charge sheet and revealed a prima facie case for prosecution. It alleged that the petitioners participated in a structured fraudulent scheme by inducing investors with promises of high returns, floating a fictitious entity called Digi Mudra Connect Pvt. Ltd., promoting a fake digital coin named SIITO, and diverting investor funds after collection.

Rejecting the contention that cryptocurrency transactions, as recognised virtual digital assets, could not attract criminal liability, the Court clarified:

“Criminal law cannot be permitted to degenerate into a coercive instrument for enforcement of purely civil claims or recovery of money arising out of commercial losses. The distinction between a civil wrong and a criminal offence lies in the intention which animates the act. A transaction may appear commercial in form, yet assume criminal colour if deception exists at its inception.”

The Bench further held that the allegations went beyond a failed investment dispute and indicated coordinated inducement of investors through misrepresentation, creation of fictitious structures, and digital fund collection linked to the accused. It noted:

“Such allegations, if proved, clearly transcend civil liability and attract criminal culpability founded on deceit and dishonest inducement.”

Addressing reliance on the legal recognition of cryptocurrency, the Court held that the issue did not concern the legitimacy of virtual assets but the alleged misuse of that medium to facilitate deception. It stated:

“The prosecution does not rest upon the mere dissemination, trading, or promotion of cryptocurrency. It concerns the use of the façade of cryptocurrency trading as an instrument for deception and inducement of investors. Even a lawful business activity may attract criminal liability if it operates as a cloak for fraud. The law does not grant immunity to deceit merely because the medium used is not prohibited.”

The Bench also found that the defence claiming limited role as agents raised disputed factual questions requiring evidence and could not be adjudicated in proceedings under Section 482 CrPC.

Accordingly, the High Court concluded that the allegations disclosed cognizable offences warranting trial, refused to interfere and dismissed the petitions.

For Petitioners: Advocate Soumya Ranjan Das

For Opposite Parties: Advocate Sarita Moharana, ASC