Supreme Court Rulings On Cryptocurrency Wallet Hacking
cryptocurrency wallet hacking and related issues like wallet access, disclosure of credentials, and exchange liabilities. Cryptocurrency law is still evolving in India, so these rulings often address procedural aspects and investigations rather than fully developed principles on hacking itself. Still, they set important precedents.
1. GainBitcoin Scam Case: Disclosure of Wallet Credentials
Facts:
The Enforcement Directorate (ED) investigated a large-scale Bitcoin scam involving the company GainBitcoin and its promoters. The accused were alleged to have defrauded thousands by promising returns through cryptocurrency investments. Investigators sought access to cryptocurrency wallets to trace and recover funds.
Supreme Court Ruling:
The Supreme Court directed the accused to disclose the username and password of their Bitcoin wallets to the ED for investigation. The court emphasized that such disclosure is critical for tracing the flow of cryptocurrency and preventing tampering with digital evidence.
Significance:
The ruling recognizes that wallet credentials (usernames, passwords, private keys) are crucial evidence in cryptocurrency fraud investigations.
Courts can compel disclosure of such sensitive information despite privacy concerns, balancing investigative needs with individual rights.
It highlights the unique challenges posed by decentralized digital assets in law enforcement.
2. Transfer of FIRs Related to Bitcoin Scam to Central Agencies
Facts:
Multiple FIRs across various states were lodged against promoters of the GainBitcoin scheme and other crypto frauds. These cases involved alleged hacking or unauthorized access to wallets, misappropriation of crypto funds, and scam operations.
Supreme Court Direction:
The Court transferred over 40 FIRs related to the Bitcoin scam to the Central Bureau of Investigation (CBI) for consolidated and effective investigation. It also ruled that accused individuals must cooperate fully, including handing over access to digital wallets and passwords.
Significance:
This demonstrates the Supreme Court’s recognition of the complex nature of cryptocurrency-related crimes, including wallet hacking and scams, which require centralized investigation.
It underscores the judiciary’s support for enabling agencies to get comprehensive access to crypto wallet information for fair adjudication.
3. WazirX Hack Petition
Facts:
In 2024, the crypto exchange WazirX allegedly suffered a major hack resulting in losses worth hundreds of crores of rupees. Victims of the hack approached the Supreme Court seeking relief, alleging negligence on the part of the exchange in protecting wallet security and users’ funds.
Judicial Response:
The Supreme Court registered the writ petition but did not issue substantial interim relief. The court noted the regulatory uncertainty around cryptocurrencies in India, making it cautious in issuing directions or holding exchanges liable.
Significance:
The case highlights the judiciary’s role in examining the duty of care owed by exchanges to protect wallets from hacking and negligence.
It also shows the limitations courts face due to lack of clear crypto regulatory frameworks.
The case may pave the way for future rulings on the liability of custodians of crypto wallets in India.
4. Sriki Bitcoin Scam Case — Alleged Unauthorized Wallet Access
Facts:
An accused named Sriki was arrested for hacking Bitcoin wallets. Allegations arose that during custody, police or cyber officials accessed his hardware and cloud wallets without proper authorization, potentially deleting logs and tampering with evidence.
Judicial/Investigative Developments:
While not a final Supreme Court judgment, courts and investigative agencies took cognizance of possible illegal access to wallets and digital evidence tampering. FIRs were filed against involved officials, and forensic analysis of wallets and cloud data was conducted.
Significance:
This case raises important legal issues around rights of accused regarding wallet access and digital privacy.
It stresses the need for courts to monitor chain of custody and admissibility of digital evidence from cryptocurrency wallets.
Shows the complexity of evidence preservation in crypto wallet hacking investigations.
5. ED’s Power to Access Digital Wallets in Money Laundering Cases
Facts:
In various cases involving cryptocurrency money laundering, the ED has sought directions from courts including the Supreme Court to access the digital wallets, private keys, and related data held by accused persons.
Judicial Observations:
The Supreme Court and High Courts have generally supported investigative agencies’ rights to access such data, subject to due process. Courts emphasize balancing privacy rights with the state’s interest in tracing illicit financial flows involving cryptocurrencies.
Significance:
The rulings clarify that digital wallets, though decentralized, are subject to judicial oversight and can be accessed legally for enforcement.
This sets a precedent for legal frameworks to include wallet access and data preservation mandates in crypto cases.
Summary:
| Case/Order | Key Legal Point | Significance |
|---|---|---|
| GainBitcoin Wallet Disclosure | Courts can direct accused to disclose wallet credentials | Balances privacy vs. investigation needs |
| Transfer of FIRs to CBI | Centralized investigation of crypto fraud and wallet hacking | Recognizes complexity of crypto crimes |
| WazirX Hack Petition | Caution due to regulatory uncertainty; exchange liability debated | Judicial engagement with exchange security |
| Sriki Wallet Access Allegation | Alleged unauthorized access to accused’s crypto wallets | Highlights digital evidence rights and chain of custody |
| ED Power in Money Laundering Cases | Support for accessing crypto wallets under due process | Precedent for legal wallet access in investigations |
Conclusion
Supreme Court rulings so far primarily emphasize:
The necessity for disclosure of wallet credentials for investigations.
The importance of centralized and coordinated probing of crypto crimes.
The challenges due to regulatory gaps impacting judicial decisions.
Emerging judicial concern for digital evidence integrity and privacy rights.
The increasing recognition of custodians’ and exchanges’ responsibilities.
While full-fledged Supreme Court judgments on wallet hacking itself (like external cyber theft) are still emerging, these rulings lay foundational principles for how the judiciary treats cryptocurrency wallet hacking in India.
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