The Patiala House Court has discharged an accused in a cryptocurrency fraud case arising out of the alleged operation of investment platforms “Bits2BTC” and “BitsCoinBank”, holding that mere participation in a multi-level marketing (MLM) network and receipt of referral commissions, without material linking the accused to the management, control or operation of the alleged scheme, is insufficient to raise the grave suspicion necessary for framing charges.
The Court was considering whether charges should be framed against six accused, including two companies, in a case involving allegations of cheating, criminal breach of trust, criminal conspiracy and offences under the Information Technology Act. While deciding on whether the charges be framed against the remaining accused, the Court found the material against one accused to be materially different.
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The Court observed that the prosecution had not placed any material to show that the accused held a managerial or controlling position in either of the companies allegedly operating the cryptocurrency platforms. It noted that his name did not figure in the agreements relating to the development or administration of the platforms, nor was there any evidence connecting him with operational decision-making, management of investor wallets, cryptocurrency infrastructure, databases, payout systems or migration of investor assets.
The Court further found that the material collected during investigation indicated that the accused had himself invested in the scheme and suffered losses after payouts ceased. It held that mere participation in the network structure or receipt of referral incentives, without more, could not automatically justify an inference that he shared the alleged criminal design or possessed knowledge of the alleged fraud. At best, the material raised a suspicion that he functioned as a network participant or investor, which fell short of the grave suspicion required to proceed to trial.
The Court also discharged all the accused of the offence under Section 66 of the Information Technology Act, 2000, observing that the mere use of websites, computer resources, cryptocurrency wallets and electronic platforms in the course of the alleged transactions, without material disclosing the statutory ingredients of the offence, was insufficient to frame a charge under the provision.
Accordingly, the Court discharged the accused of offences under Sections 406, 409, 420 and 120B of the IPC, while directing that charges be framed against the remaining accused under the relevant provisions of the IPC.