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Informist, Thursday, Jan. 9, 2025

 

NEW DELHI – The Delhi High Court on Thursday issued notices to the Reserve Bank of India, the Securities and Exchange Board of India, the government, and its investigative agencies on a petition seeking a comprehensive regulatory mechanism for cryptocurrency and other virtual digital assets to protect investors.

 

Petitioners Aditya Malhotra and others, who were users of BitBNS, a cryptocurrency exchange platform in India, also sought the registration of a case by a special investigation team or the Central Bureau of Investigation against BitBNS to probe allegations of financial fraud.

 

The petitioners said the funds of the BitBNS investors must be released and arbitrary restrictions on withdrawals must be lifted. In addition, compensation should be paid to BitBNS users who have suffered losses due to mismanagement and fraudulent activities by BitBNS, they said.

 

In October, an anonymous user of BitBNS had lodged a complaint with the national cyber crime portal to seek a probe after he was unable to withdraw his funds from the platform for nearly 11 months. Thereafter, other users across the country also complained about not being able to withdraw their funds for at least a year and a half.

 

Highlighting the crisis of BitBNS, the petitioners said there was a dire need for better regulation of cryptocurrency and other virtual digital assets in India. "The absence of such regulations leaves users vulnerable to fraud, financial losses, and mismanagement," said the petitioners. Malhotra said BitBNS had hidden the information that there was a cyberattack on it in February 2022, after which users were unable to withdraw funds from their wallets, causing them significant financial distress and hardships. 

 

"BitBNS, as a cryptocurrency exchange, owes a fiduciary duty to its users to ensure transparency, security, and timely resolution of user grievances," said the petitioners. By concealing the February 2022 cyberattack in the guise of system maintenance, it had violated this duty, causing financial and psychological harm to its users, the petitioners added.

 

They said discrepancies in the portfolio values of their cryptocurrencies and the wallet balances on the exchange platform did not align with market trends, which caused them further financial loss and distress. Despite repeated complaints and appeals to address these issues, BitBNS failed to provide resolution, leaving the users without access to their funds. 

 

The petitioners said that when advance notice was given to the cryptocurrency platform about the petition, it had started paying back investors in bits. When Justice Sachin Datta asked who was authorised to probe these allegations, the petitioners answered that the Enforcement Directorate and the Central Bureau of Investigation had the infrastructure to investigate such cases.

 

They said attempts to avail other legal remedies, including a joint complaint to the national cyber crime portal, have yielded no results due to challenges of jurisdiction and infrastructure. The high court will hear the case next on Apr. 4.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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