Additional solicitor general Aishwarya Bhati was asked by a bench of Justices D Y Chandrachud and Surya Kant - "We'd like you to explain us how you deal with those who trade Bitcoin and other cryptocurrencies. Is it still illegal in India to deal in cryptocurrency?" The court was hearing a case in which the Enforcement Directorate was prosecuting three brothers and their father under the Prevention of Money Laundering Act (PMLA).
The court's query may have stemmed from a plan in the Union Budget to collect a tax on cryptocurrency trade without giving it legal status. Bhati said the government would have no problem stating its position on the court's question, but that would be unnecessary because this is a case of fraud and money laundering, both of which are crimes under the PMLA.
She explained that Amit, Ajay, and Vivek Bharadwaj, along with their father Mahendra Bharadwaj, devised a criminal scheme to defraud the general public by claiming that Variabletech Pvt Ltd, Singapore, is involved in block chain and crypto currency mining technology and has a mining farm in China through the website www.gainbitcoin.com.
According to the ASG, anyone could buy a modest piece of cloud mining space (hash value) for 18 months through a contract with Variabletech and receive a guaranteed return of 10% per Bitcoin over that time.
Bharti told the bench that, "Investigation conducted so far has revealed that the petitioners in connivance with others, that is multi-level marketing agents and associates, have collected 80,000 Bitcoins, valued approximately at Rs 20,000 crore today. Though they are on bail since 2019, they are not cooperating with the investigation. The investigating officer requires their user ids and passwords to unravel the extent of the cheating and money laundering operations carried out by the accused."
She stated that the accused suspects have been summoned several times, but they have refused to appear before the investigating officer on the basis of the bail orders. The court ordered the accused to appear before the IO when summoned, and the ED to file a status of probe report within four weeks, as well as notify the court on the level of cooperation supplied by the accused in the inquiry.
The bench ordered the IO to provide a status report demonstrating the accused's cooperation and set a four-week deadline for the case to be heard again. The temporary order preventing the accused's arrest will remain in effect until the next hearing date, according to the bench.
The Supreme Court, in March 2020, overturned the Reserve Bank of India's regulation prohibiting banks from enabling crypto transactions.
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