Economic Offences Are Grave Offences Against Society: Jammu & Kashmir High Court Denies Anticipatory Bail in ₹6 Crore Crypto Ponzi Scam

“Pre-Arrest Bail Not Meant to Shield Those Who Evade Law and Betray Public Trust”: J&K High Court refused to grant anticipatory bail to the petitioner accused of laundering ₹6.05 crores through a fraudulent cryptocurrency Ponzi scheme titled “Emollient Coin.” Justice Mohd. Yousuf Wani, in a strongly worded judgment, emphasized the gravity of economic offences and held that custodial interrogation of the accused was imperative in light of the large-scale financial victimization of innocent investors.

The case stemmed from an FIR registered by the Leh police on 5th March 2020 under Section 420 IPC (corresponding to Section 318 of the BNSS), based on a complaint by the Additional District Magistrate, Leh. The inquiry revealed that thousands of innocent investors were cheated via a Ponzi scheme operated under the garb of a fictitious cryptocurrency “Emollient Coin.” Following the discovery of the money laundering link, the Enforcement Directorate (ED) initiated proceedings under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA).

The petitioner, Naresh Kumar Gulia, approached the High Court under Section 482 BNSS seeking pre-arrest bail, claiming false implication and parity with other accused who had been granted bail.

The High Court framed the central question: whether, in the backdrop of grave economic offences involving a fraudulent crypto scheme, the petitioner was entitled to the discretionary protection of pre-arrest bail.

Justice Mohd. Yousuf Wani made it clear: “Pre-arrest bail is an extraordinary remedy meant to protect those genuinely facing false and frivolous charges… it is not intended to shield individuals against whom credible allegations of grave financial crime are established.”

Discussing the allegations, the Court noted that over 2000 individuals from Leh alone were defrauded, with the total proceeds of crime estimated at ₹16.81 crores, including ₹6.05 crores specifically linked to the petitioner. It was alleged that Gulia operated the scam under the façade of a fake cryptocurrency, organized investment seminars, launched fraudulent mobile applications, and absconded during investigation.

Justice Wani firmly observed: “The petitioner is alleged to have absconded during investigation and refused to cooperate despite receiving summons under law… Such conduct disentitles him from any indulgence of this Court.”

Referring to the Supreme Court’s ruling in Siddharam Satlingappa Mhetre v. State of Maharashtra [(2011) AIR SC 312], the Court acknowledged the foundational principles of pre-arrest bail but stressed that each case must be decided in its own factual matrix. The Court distinguished this case from ordinary disputes:

“The allegations do not merely concern a financial transaction but involve multi-level public deception, cross-border fraud, and laundering of public funds, thereby causing a wide ripple of injustice.”

The Court meticulously reviewed guiding principles from Sushila Aggarwal v. State (NCT of Delhi) [(2020) 5 SCC 1] and reaffirmed the importance of considering the gravity of offence, potential tampering of evidence, and the public interest while deciding anticipatory bail.

The Court underscored: “Where custodial interrogation is essential for unearthing the modus operandi, tracing proceeds of crime, and confronting the accused with co-accused and documents, the extraordinary remedy of pre-arrest bail cannot be granted.”

Invoking Section 45 of PMLA, Justice Wani reiterated the "twin conditions" for bail: “The twin conditions under Section 45 PMLA not only apply to regular bail but also bear substantial persuasive weight while considering anticipatory bail in serious economic offences.”

The Court noted the petitioner’s alleged central role in launching the scheme, receiving large proceeds of crime, and evading law enforcement: “When the allegations indicate a well-orchestrated fraudulent scheme impacting thousands of victims across multiple jurisdictions, grant of anticipatory bail would be a travesty of justice.”

Ultimately, the Court dismissed the bail application, concluding: “The presence of the petitioner in custody is imperative for a fair, logical, and result-oriented investigation.”

In this landmark decision, the High Court of Jammu & Kashmir and Ladakh has reinforced the principle that economic offences, particularly those involving large-scale public deception and money laundering, are serious offences against the financial health of society. The judgment echoes the legal principle that the gravity of offence and the necessity for thorough investigation override personal liberty claims in such situations.

This decision also highlights the judiciary’s commitment to safeguarding public trust against financial fraud, especially in emerging arenas like cryptocurrencies, where regulatory loopholes are often exploited.

Justice Wani’s parting observation summed up the case succinctly: “The liberty of an individual, though sacred, cannot be allowed to eclipse the rights of thousands who have been defrauded of their life’s savings under false promises of wealth.”

Date of Decision: 15th July 2025