A petition filed in the Delhi High Court seeking regulation of cryptocurrencies and an investigation into the recent BitBNS crisis. BitBNS, a prominent Indian cryptocurrency exchange, faced backlash after users reported withdrawal freezes, sparking concerns among investors. The court has now directed the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) to respond to the issue. This case highlights the growing need for stronger oversight in India’s cryptocurrency sector.
New Delhi: The Delhi High Court requested responses from the Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI) regarding a plea that raises concerns about a financial crisis allegedly impacting users of the BitBNS cryptocurrency exchange platform.
BitBNS, an Indian crypto exchange, has been under scrutiny after customers reported a freeze on withdrawals. The petition, filed by 16 users of the platform, calls for an investigation by a Special Investigation Team (SIT) or the Central Bureau of Investigation (CBI).
The petition emphasizes the urgent need for improved regulation of cryptocurrencies and virtual digital assets (VDAs) in India.
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The petitioners argue,
“The absence of such regulations leaves users vulnerable to fraud, financial losses, and mismanagement.”
During the hearing, the petitioners’ counsel highlighted allegations that BitBNS took money from numerous individuals in India, only to transfer it abroad following a cyberattack that was allegedly concealed from users.
The counsel stated,
“BitBNS, as a cryptocurrency exchange, owes a fiduciary duty to its users to ensure transparency, security, and timely resolution of user grievances. By concealing the February 2022 cyberattack under the guise of ‘system maintenance,’ it has violated this duty, causing financial and psychological harm to its users,”
The petitioners noted that after an advanced notice of the current petition was issued to the crypto platform (whose directors are involved in the case), BitBNS began repaying investors incrementally.
Justice Sachin Datta inquired,
“Who is authorized to investigate the allegations?”
The counsel responded that the Enforcement Directorate (ED) and the CBI have the necessary infrastructure for such investigations.
The court then directed SEBI and RBI, among other authorities named in the petition, to verify the allegations made by the petitioners.
A subsequent hearing scheduled for April 4.
According to the plea, following the cyberattack in February 2022, BitBNS users were left unable to withdraw funds from their wallets, leading to significant financial distress.
The plea asserts,
“Numerous users have faced month-long delays in accessing their legitimate funds, with some unable to withdraw their investments. Additionally, discrepancies in portfolio values and wallet balances that did not align with market trends have resulted in further financial losses and emotional distress. Despite repeated complaints and appeals for resolution, BitBNS has failed to address these issues, leaving crores of user funds inaccessible,”
The petitioners also reported that attempts to seek other legal remedies, including a joint complaint to the National Cyber Crime Portal, have been ineffective due to jurisdictional and infrastructural challenges, prompting them to seek the Delhi High Court’s intervention.
Their petition includes several requests:
- Directing SEBI, RBI, and/or the Union Finance Ministry, along with the Ministry of Electronics and Information Technology (MEITY), to establish a comprehensive regulatory framework for cryptocurrency/VDAs to protect investors.
- Mandating an SIT or the CBI to register a case against BitBNS to thoroughly investigate allegations of financial fraud, cyberattacks, fund mismanagement, and operational lapses.
- Releasing the funds of BitBNS investors and lifting the “arbitrary” restrictions on withdrawals.
- Providing compensation to BitBNS users who have suffered losses due to the platform’s mismanagement and fraudulent activities.
The petition filed by advocates Dinesh Jotwani, Shivalika Midha, Shruti Singh, Bhargav Baisoya, and Aniket Sahu.
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