Crypto Fraud
Reports in India Jump 8-Fold in Three Years, FIU Flags Rising Cybercrime Risks
Crypto Exchange Under
PMLA Surveillance
·
Reports of fraudulent
and suspicious cryptocurrency transactions in India have surged
from 1,343 cases in FY24
to 11,720 cases in the first
eight months of FY26, a rise of over 773%, according to government
analysis.
·
82% of cases involve users aged 20–40, highlighting growing exposure
of young investors to crypto-linked fraud and cybercrime.
·
India now has about 34
million virtual digital asset (VDA) users, holding assets worth
₹24,800 crore,
with 41% using offshore platforms
beyond direct regulatory reach.
·
Since March
2023, crypto exchanges and VDA service providers have been brought
under the Prevention of Money
Laundering Act (PMLA), requiring registration with the Financial Intelligence Unit (FIU)
and filing of Suspicious Transaction
Reports (STRs).
·
52 VDA service providers have registered so far;
STRs rose from 1,343 in FY24
to 6,272 in FY25,
and 11,720 by November 30,
2025 in FY26.
·
Fraud accounts for 62% of suspicious crypto activity,
followed by unusual/complex
transactions (16%) and abnormal
account behaviour (10%).
·
Tether (USDT) dominates flagged cases, featuring in 76% of reports, while Bitcoin
accounts for about 6%.
·
Rajasthan (18%) and Uttar Pradesh (11%) lead in reported suspicious
crypto transactions, followed by Maharashtra and West Bengal (7% each).
·
Authorities have imposed ₹29 crore in penalties and blocked 63 crypto-related websites
for non-compliance under the IT Act.
·
A key case study revealed links to Cambodia-based cybercrime networks,
with funds routed through Huione Pay, highlighting risks
of money laundering, trafficking, and cross-border crime.
·
Beyond crime, regulators flagged serious tax evasion challenges,
as offshore exchanges, private wallets, and decentralised platforms make tracking
ownership and taxable income increasingly difficult.
Fraudulent
and suspicious transactions among India’s cryptocurrency users have surged from
a mere 1,343 reported instances in 2023-24 financial year to 11,720 in the first
eight months of the current fiscal 773%, with 82% involving Indians aged 20-40.,
according to government a report seen by HT.
The
explosive growth in dubious activity comes as India’s cryptocurrency market has
expanded rapidly despite persistent regulatory concerns. As of November 30, 2025,
the country has 34 million virtual digital asset (VDA) users—industry parlance for
cryptocurrencies and related tokens—holding assets worth ₹24,800 crore. Nearly
41% have invested through offshore platforms, beyond the direct reach of Indian
authorities.
The
government has been wary of cryptocurrencies, citing risks of money laundering,
terror financing and tax evasion. In March 2023, the Narendra Modi government brought
cryptocurrency exchanges, transfers and related financial services under the Prevention
of Money Laundering Act in an attempt to bring the largely unregulated sector under
scrutiny.
Under
the law, any VDA service provider operating in India—whether based offshore or onshore—must
register with the Financial Intelligence Unit (FIU), the country’s financial intelligence
agency, which compiles reports on such activity. The obligation is activity-based:
if a platform allows Indian users to exchange cryptocurrencies for rupees, transfer
digital assets, or store them, it must register and report suspicious activity,
regardless of where the company is physically located.
So
far, 52 VDA service providers have registered with the FIU. These platforms must
file suspicious transaction reports (STRs) whenever they detect activity that raises
red flags — transactions that may involve proceeds of crime, appear unusually complex
without justification, or have no clear economic purpose. Red flags include sudden
activity in dormant accounts, transactions deliberately kept just under reporting
thresholds, circular trading to create artificial losses, and cases where the source
of funds cannot be verified.
The
number of such reports has exploded. Service providers filed 1,343 STRs in fiscal
2024. The figure jumped to 6,272 in fiscal 2025, and has already reached 11,720
in the current fiscal year till November 30, according to FIU analysis seen by
HT.
An
analysis of 9,795 reports filed between May 2023 and May 2025 revealed the patterns.
Tether (USDT)—a so-called stablecoin pegged to the US dollar—was the most common
digital asset, featuring in 7,467 cases (76%). Bitcoin accounted for 6%, these documents
show.
Fraud
transactions made up 62% of VDA-related suspicious activity. Unusual or complex
transactions accounted for 16%, while unusual account activities made up 10%.
Geographically,
Rajasthan led with 18% of suspicious transaction reports, followed by Uttar Pradesh
at 11%. Maharashtra and West Bengal each accounted for 7%, and Madhya Pradesh 6%,
according to the STR analysed by the government.
Bharatiya
Janata Party (BJP) lawmaker Bhartruhari Mahtab-led standing committee on finance
has begun reviewing the crypto sector.
Authorities
have levied ₹29 crore in penalties so far and blocked 63 websites for failing
to register or comply with Indian laws under Section 69A of the Information Technology
Act, 2000.
The Cambodia connection
One
case study flagged by the FIU illustrates the threats posed by such activity. Investigators
identified 34 customers whose internet addresses traced back to Cambodia. These
individuals, the analysis determined, were using Cambodian mobile phone numbers
to access their Indian cryptocurrency accounts and receiving deposits through Huione Pay, a Cambodian payment service. Authorities suspect
the money was linked to cybercrimes and human trafficking.
“These
individuals exhibited consistent behaviour of funding their accounts with USDT,
immediately liquidating it, and withdrawing the corresponding amount in rupees to
their bank accounts,” the FIU report said.
Blockchain
monitoring tools—software that tracks cryptocurrency transactions—revealed the USDT
originated from Huione Pay. Several customers shared the
same device fingerprint, meaning they had logged in from the same phone or computer,
and used common internet addresses.
Huione Pay is stated to have responded, saying
that after repeated attempts via WhatsApp, the service provider connected with 21
of these customers. They were located in Cambodia (eight), Thailand (six), Vietnam
(one) and India (one), working as hotel or restaurant workers, civil engineers and
supermarket employees—occupations unlikely to generate the kind of transaction volumes
authorities had flagged.
However,
the company’s own status is sanctioned. The US announced that it had cut off Huione Group and its subsidiaries from the American financial
system, taking away its ability to trade in dollars.
The tax challenge
Beyond
money laundering concerns, cryptocurrencies pose a major challenge for tax collection.
The assets permit anonymous, borderless and near-instant transfer of value without
relying on banks or other regulated financial institutions that typically report
transactions to tax authorities.
The
growing use of offshore exchanges, private digital wallets that users control entirely,
and decentralised platforms makes it difficult for tax authorities to detect taxable
income, identify who actually owns the assets, and recover tax dues. As a result,
substantial cryptocurrency-related income remains outside the tax system.