OPINION | Lost, Stolen, Or Frozen Crypto? Indian Law Has More Options Than You Think

Crypto losses can stem from fraud, custody failures or insolvency. Here’s how Indian law can help investors preserve assets and pursue recovery.

Indian law offers different remedies for crypto fraud, custody failures, insolvency and disputed ownership.

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Key points generated by AI, verified by newsroom

• Crypto investors must understand loss type before seeking legal recourse.
• Courts offer varied remedies, preserving crypto assets during disputes.
• Report cyber fraud; PMLA facilitates recovery of crime proceeds.

A crypto loss rarely fits one category. It may arise from fraud, failed custody or insolvency. An FIR can begin the search for an offender, but it does not decide who owns assets in a disputed wallet. A consumer commission can compensate a failure of service, but not the ordinary fall in a token’s price. Before approaching an authority, the investor must understand the nature of the loss.

Recent cases show why choosing the right forum matters. In Rana Handa v. BitBNSInternet, the Delhi High Court held that regulation of VDA activity did not turn a private exchange into an instrument of the State. An Article 226 writ was not the answer to a commercial dispute. Criminal or civil remedies had to be pursued.

That ruling does not require waiting for a final outcome. Where crypto may be moved, preservation comes first. Sections 9 and 17 of the Arbitration and Conciliation Act, 1996, permit preservation or security. In Rhutikumari v. ZanmaiLabs, the Madras High Court recognised crypto as property. It ordered a Rs 9.56 lakh bank guarantee or equivalent escrow during arbitration. The order preserved value without determining liability.

When loss arises from fraud, the legal route begins before court. Victims should call 1930 and report through the National Cybercrime Reporting Portal. Section 173 of the Bharatiya Nagarik Suraksha Sanhita permits electronic reporting regardless of location. By January 31, 2026, the cyber-fraud reporting system had saved more than Rs 8,690 crore across over 24.65 lakh complaints.

These figures cover cybercrime generally, not crypto alone. India publishes no national count of crypto complaints, resolutions or recoveries. Cheating may attract Section 318 of the Bharatiya Nyaya Sanhita. Online identity theft or personation may engage Sections 66C and 66D of the Information Technology Act. The BNS nevertheless separates initial dishonesty from a promise honestly made and later broken.
If the ED attaches fraud proceeds, the victim’s role need not end there. Section 8(8) of the Prevention of Money Laundering Act permits the Special Court to restore property to a claimant with a legitimate interest and quantifiable loss. Rule 3A requires good faith and no involvement in laundering. PMLA charges must also have been framed. During 2024-25, Rs 15,261 crore was restored to victims in 30 PMLA cases. The figure is not crypto-specific, but confirms restitution is used.

Not every loss begins with theft. An operation promising fixed returns may fall under the Banning of Unregulated Deposit Schemes Act. Sections 3 and 5 prohibit unregulated schemes and deceptive inducement. The Act permits attachment and asset distribution. The definition of a “deposit” must be satisfied. A crypto purchase does not become a deposit because its value falls.

Disputes arise within lawful platforms. Blocked withdrawals, unauthorised transactions or negligent custody may be deficient service under Section 2(11) of the Consumer Protection Act, 2019. Section 39 permits refunds and compensation. Section 35(1)(c) permits a representative complaint by similarly affected consumers. Commercial trading may fall outside consumer protection. Market loss alone is not service deficiency.

Service failure may become platform failure. Insolvency then turns compensation into a question of ownership. Section 36(4) of the Insolvency and Bankruptcy Code excludes assets held in trust, and assets whose title was not transferred, from the liquidation estate. A user who proves beneficial ownership or segregated custody may have a proprietary claim. Pooled holdings may leave only an unsecured monetary claim.

FIU registration should not be mistaken for investor protection. As of March 9 this year, 54 VDA service providers were registered with FIU-IND. Registration places them within the anti-money-laundering framework. It is not a government licence, solvency certificate or compensation guarantee.

Together, these provisions do not form a dedicated crypto investor-protection code. They allow the law to respond to the wrong beneath the technology. Fraud remains fraud when a token is involved. Custody continues to carry obligations. Property does not cease to have an owner because it is recorded on a blockchain. Investors must preserve the evidence connecting those principles to the asset. The sooner that connection is made, the greater the chance that a legal right can produce recovery.

(The author is the CEO of Giottus)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.

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