Corporate Affairs Ministry Seeks Action Against Crypto Ponzi Platforms
The Corporate Affairs Ministry sought action against those running cryptocurrency ponzi schemes under anti-money laundering act.
The Ministry of Corporate Affairs has sought action against those running cryptocurrency Ponzi schemes under the anti-money laundering act until a new law banning the digital tokens is implemented, a senior government official aware of the development told BloombergQuint.
Many Ponzi schemes are being run wherein investors get lured into investing in cryptocurrencies on the promise of inflated returns, the official said quoting Corporate Affairs Secretary Injeti Srinivas’ letter to Ajay Bhushan Pandey, his counterpart in the revenue department. Action against such culprits should be taken under the Prevention of Money Laundering Act, 2002 by invoking Section 120B and Section 417 of the Indian Penal Code, 1860, Srinivas is said to have written.
These two sections entail a prison term of up to one year with penalty. Investigation and prosecution under the PMLA Act are undertaken by the Directorate of Enforcement that comes under the Department of Revenue, Ministry of Finance.
Srinivas didn’t respond to BloombergQuint’s text message and an email seeking a comment.
Several cases cheating investors through Ponzi crypto schemes have been reported in the last one year.
The fraudulent cryptocurrency trading schemes, according to the letter cited by the official, may take advantage of gaps in regulatory frameworks to cheat investors, and strict action needs to be taken against them.
Till the time Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 is implemented, the government must send a strong signal to culprits, and protect the interest of investors, Srinivas wrote.
According to the draft bill, those who directly or indirectly mine, generate, hold, sell, deal in, dispose, issue or transfer cryptocurrency as “a means of investment”, issue cryptocurrency as a “means of raising funds” or issue cryptocurrency related financial products, shall be punishable with a fine or an imprisonment term of one to 10 years, or both.
The draft bill also states those who use cryptocurrency
- as a medium of exchange;
- as a store of value, or a unit of account;
- as a payment system;
- buy or sell or store cryptocurrency;
- provide cryptocurrency related services to consumers;
- trade cryptocurrency with Indian or foreign currency;
- as a basis of credit
will be subject to a fine or imprisonment which may extend up to 10 years, or both.
But there may be a change in the draft bill to have a mild punishment for those using cryptocurrencies on a “non-commercial basis”, another government official told BloombergQuint requesting anonymity as he’s not authorised to speak with the media. These individuals, he said, shall be punishable with a fine that will be notified by the central government.
The draft bill—part of the report of the panel headed by Economic Affairs Secretary Subhash Chandra Garg—will be submitted to Finance Minister Nirmala Sitharaman in 10 days, the official said. The draft bill will also be circulated among various government departments for consultation, he said.