Surge in Cryptocurrency Fraud in India – obscure deals, deficient laws major causes

India has, regrettably, become a veritable haven for fraudsters who exploit the avarice of investors in pursuit of astronomical returns on their investments—in other words, the perennial allure of get-rich-quick schemes.

• The lack of clear cryptocurrency regulations in India has created a fertile ground for scams, enabling fraudsters to exploit investor greed and operate with near impunity15.
• The anonymity and cross-border nature of crypto transactions make it extremely difficult for law enforcement to trace funds or recover losses, leaving 95% of victims permanently out of pocket15.
• Despite massive crackdowns and high-profile arrests, crypto-related fraud in India is accelerating, with Ponzi schemes, fake coins, and social media promotions targeting thousands of unsuspecting investors every mont

The Indian cryptocurrency market size in India valued at nearly US$2.6billion in 2024 and estimated to reach US$13.9billion by 2033, per IMRAC research, has, regrettably become the happy hunting ground for fraudsters preying on the greed of investors looking astronomical returns on the investments – in other words the usual get-rich-quick schemes. India emerged as the epicenter of this surge, with nearly 27,000 suspicious accounts flagged, followed by significant activity in the CIS region and Indonesia according to BTCC a cryptocurrency exchange established in June 2011. Billions of dollars have been scammed off thousands of investors in the last few years in fake cryptocurrency schemes, operating in the twilight zone of the legal system, from the relative safety foreign shores, and taking advantage of the cloak of anonymity of such transactions.  

India, as yet, does not have a specific law that directly governs cryptocurrencies or deals exclusively with offenses related to digital assets. This gray area is a major reason behind the rising fraud in cryptocurrency. The other being the the anonymity or pseudonymity associated with cryptocurrency transactions. Unlike traditional financial systems tied to verified personal identities, many cryptocurrencies allow users to maintain anonymity, making tracing and tracking criminal activities extremely difficult. The third key factor is that fraudsters can operate from foreign jurisdictions, using decentralized applications and exchanges that leave little digital trace, making it difficult for Indian law enforcement agencies to establish jurisdiction or to apprehend offenders. The draft legislation titled the “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019” was introduced but never enacted into law, leaving cryptocurrencies in a legal gray area.

In a very recent case over ₹350 crore in illicit proceeds were converted into cryptocurrency to obscure their origin, as revealed by bank and crypto wallet transaction analysis. These ponzi schemes were being promoted through multiple social media groups. An analysis of bank account transactions and cryptocurrency wallets has revealed that the illegal proceeds from these schemes were being converted into cryptocurrencies to obscure their origin.

A couple of years ago in 2023, in a ₹2,500 crore cryptocurrency scam, approximately 5,000 government employees (including Himachal Pradesh police) and land compensation recipients invested heavily. The Special Investigation Team (SIT) confirmed ₹500 crore of these funds—drawn from victims’ hard-earned savings—is unlikely recoverable.

India saw a 30% month-on-month surge in cryptocurrency spot trading volumes in May 2025, signaling renewed investor confidence. This aligns with global trends driven by increased institutional participation, regulatory clarity, and positive macroeconomic cues. CoinDCX reported spot volumes rising from $374M in April to $492M in May (+32%), with Bitcoin and Ethereum dominating trades and Moo Deng emerging as a top mid-cap performer.

In June 2022 India’s GainBitcoin scam has emerged as one of the largest crypto Ponzi schemes, potentially affecting over 1 lakh people and involving a loss of up to Rs 1 trillion. Mastermind Amit Bhardwaj, who passed away earlier this year, allegedly amassed 385,000 to 600,000 Bitcoins. The scam operated as a multi-level marketing scheme promising high returns.

The scheme lured the investors offering extraordinary returns of 10 per cent per month in Bitcoin over an 18-month period urging them to purchase the digital currency from external exchanges and deposit it with GainBitcoin through “cloud mining” contracts.

In February this year the Enforcement Directorate (ED) has launched a major crackdown on cryptocurrency-related fraud, conducting search operations across Delhi, Jaipur, and Mumbai under the Foreign Exchange Management Act (FEMA). The raids, aimed at uncovering a large-scale scam involving illicit crypto conversions worth approximately ₹600 crore, were part of an ongoing investigation

Cryptocurrency has steadily moved from being a niche investment to a widely adopted digital asset class in India.

Although digital currencies are not recognized as legal tender yet, they are not illegal either. This grey zone has often left investors and businesses confused about how to deal with crypto assets.

According to CYFIRMA, a company specializing in threat insights to help businesses stay ahead of cyber-criminals, report on investment scams targeting Indian investors, money-doubling scheme are the most popular among scammers to rip off investors.

Fake promises of 200-3,000% returns in hours (e.g., “Turn ₹5k→₹20k in 45 mins”) followed by Ponzi structures paying early investors with new victims’ funds. The report emphasizes that 95% of victims lose funds permanently due to cross-border crypto transactions. Vigilance and institutional verification remain the strongest defenses. The regulatory ambiguity surrounding cryptocurrencies in India worsens the situation. Without a clear legal framework defining what’s permissible and what’s not, legitimate businesses operate alongside fraudulent schemes without significant oversight. This lack of clarity provides fraudsters with opportunities to deceive investors who often cannot differentiate between a legitimate exchange and a scam. This absence of comprehensive cryptocurrency regulations continues to hinder effective oversight and investor protection Consumer protections that exist in the traditional financial system are largely absent in the crypto space, leaving investors vulnerable and undermining digital asset protection. Victims of cryptocurrency scams frequently struggle to report fraud, face jurisdictional confusion and often see little hope of fund recovery due to the complexities of digital asset transactions.