Police in Patiala have reportedly busted an “Abduction” (Kidnapping) case in which the ransom demand was made in Bitcoins. This has therefore raised a question once again about the role of Bitcoins as a  “Currency of Criminals” and the need to treat it as such.

See the report about Kidnapping here

According to the report a trader by name Ashu Jain was kidnapped by 6 persons on May 30 and demanded 20 Bitcoins (approximately Rs 40 lakh equivalent) from his family. He was released after 6 days and we should presume that the family was compelled to buy bitcoins as indicated and deliver it to them. The purchase would have been done through perhaps ZebPay or Coinsure or some such Bitcoin exchanges .

The king pin was one Mr Deepak who is a B.Sc (IT) and an MBA graduate. Unfortunately, he has applied his technical knowledge and business acumen in a wrong way discrediting his educators as well.

The Police will have a strong case under IPC for Abduction, Illegal Confinement, Threat to Murder, Asking for Ransom etc… The punishment could be several life sentences and I wish this is strongly pressed and the person denied bail.

We can use this opportunity to also discuss what is the responsibility and liability of the Bitcoin exchanges who have aided and abetted in this transaction where by the family was forced to shell out its white money to buy bitcoins and deliver it to the criminals as reward for their offence. In the process the white money has become “Criminal Earnings” and the exchange has abetted in this offence under Prevention of Money Laundering Act (PMLA). Also just like Afzal Guru was tried for funding a terror activity, the exchanges are liable to be treated as abettors of the Kidnapping activity and they can be tried for life imprisonment.

If Mr Avnish Bajaj could be tried under Section 67 (ITA 2000) for his company facilitating sale of obscene video file for a total gain of around less than rs 1000, there is no reason why the owners of Bitcoin Exchanges which were involved in this transaction should not be tried for life imprisonment for abetting a crime which may fall under Sections 364, 364A, 365 etc of IPC.

As regards the Bitcoin Exchanges, they have represented to the family that “Bitcoin is a currency” and hence are liable under RBI act to promote an “Electronic piece of paper” as a “Legal Tender”. Also the commodity is being traded for and against Rupee without SEBI registration as “Commodity Traders” and hence there would be penalties under SEBI Act also to be considered.

If the sale involves any dealings with a non resident, then there would be also the FEMA considerations.

Apart from these, we all know that Bitcoin (and other AltCoins) are promoted as an innovative currency that is “Deregulated” and “eliminates the need for a Central Banking Agency like RBI and the Banks who are licensed for money exchange”.  The Indian Bitcoin exchanges have been aggressive in this aspect particularly in the last couple of months.

Now just think, If any person says that

“I want to destroy the Central Banking System of the country and float my own system of Currency”,

what would it be?

In my opinion it would amount to “Treason” and punishable as such under IPC for waging war against the Nation.

RBI is also a Critical Information Infrastructure and any direct or indirect attempt to kill the system would also amount to an offence or an attempt to commit an offence under Section 66F of ITA 2000/8. This is called “Cyber Terrorism”.

To these, apply Section 85 and Section 79, the CEO and the Directors of the Bitcoin Exchanges can be easily booked under ITA 2000/8.

It is upto them to these exchanges to come out and voluntarily  assist the prosecution and claim to be treated as “Approvers” and friends of the law enforcement. They can otherwise try to defend themselves under Section 79 of ITA 2000/8 and claim that they have exercised due diligence as an intermediary and take a chance.

I request Mr A.S.Rai, the IG of Patiala and Chief Minister Captain Amarinder Singh to pursue this angle so that in future no Indian will ever dare to ask Bitcoins as ransom either for physical kidnapping or for injecting ransomware into to the IT systems. For this purpose FIR has to include the Bitcoin Exchanges (unknown at this point of time) who have assisted in providing the Bitcoins and investigate the log records of each of the Bitcoin exchanges operating in the country to identify how the Bitcoins were sourced by the family.

This would be a deterrent measure to promote Cyber Security.

I hope the members of the “Taskforce” of the Bitcoin Regulation committee of the Ministry of Finance, and Reserve Bank of India, as well as SEBI and MCX will all take note of this development and understand that if they try to legitimize Bitcoins for whatever consideration, they will be guilty of supporting an act of Treason and Cyber Terrorism in India.

 

Naavi