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First Reported Case of Fraud Involving Bitcoin, says Indian City’s Police

Samburaj Das on 05/12/2016


The city of Lucknow in Northern India has seen its first official case involving bitcoin fraud.


A Lucknow citizen lodged a complaint with local city police about a business acquaintance swindling him in a bitcoin transaction, according to a report in the Times of India.


Shailendra Shukla, a lawyer by profession, has accused a businessman from New Delhi – India’s capital city – of duping him of 1.5 bitcoins in a routine bitcoin-to-fiat transaction. The alleged incident comes during a time when Indian demand for bitcoin is at unprecedented highs and has seen the cryptocurrency sold at premiums as high as 35%.


According to the complaint, Shukla revealed his foray into virtual currency trading after suffering losses with share market trading. He came in contact with the accused businessman through an online group where members traded bitcoins and fiat cash while keeping in contact via Facebook or WhatsApp, two popular messaging services in the country.


The transaction occurred on October 2nd when the accused asked Shukla to transfer 1.5 bitcoins. At the time, bitcoin was trading around INR ₹42,300 ($620) and Shukla claimed the businessman’s promise to transfer an amount of ₹63,450 the following day. While the bitcoins were transferred, the fiat money exchange never came through, it has been alleged.


A month passed and the still-ongoing demonetization drive by the Indian government began on November 8, wherein 86% of all the money in circulation was rendered obsolete, due to the banning of India’s two largest denominated bank notes. While the government exerted its influence over fiat money, bitcoin gained prominence as a safe store of value, away from the clutches of any authority. Indian peer-to-peer bitcoin trading, like the one involving Shukla’s case, has nearly doubled over previous all-time highs, as Indians continue to flock to bitcoin despite its premium.


At the time of publishing, the purchase price for a single bitcoin via Unocoin, a prominent bitcoin exchange in India stands at INR ₹61040 ($895), an 18% premium.


Shukla asked the businessman to return the bitcoins or its equivalent amount as the value of the cryptocurrency swelled following the country’s demonetization, to see no returns. As a result, the accuser approached a local police station in Lucknow to register a FIR (first incident report) against the New Delhi-based businessman.


The city’s deputy inspector general, Praveen Kumar, has confirmed that the accused sees two charges, IPC 319 and 420, pressed against him. The two charges of the Indian Penal Code stand for “Punishment for cheating by personation” for 419 and “Cheating and dishonestly inducing delivery of property” for 420. Both charges could see fines and imprisonment up to three and seven years, respectively.


The police inspector added:


   “It is the first time [that a] fraudulent transaction of virtual currency has been reported to [the] police. [A] further probe is on and [the] case may be assigned to [an] inspector level officer with sections under [the] IT Act.”

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