The Delhi High Court has granted the bail to the accused of fraudulent transfers from crypto wallet charged under Section 45 of the Prevention Of Money Laundering Act (PMLA).
The bench of Justice Vikas Mahajan has observed that all relevant documents and devices including laptops, mobile phones, Ledger, Hardware Wallet, etc., have already been recovered and seized. The alleged proceeds of crime held in the accounts maintained with WazirX have also been frozen. Thus, all material documents are already in possession of the investigating agencies and no further recovery is to be made from the petitioners. It is also not the case of the ED that the petitioners have a criminal record or any criminal case is pending against them. Therefore, petitioners/accused are not likely to commit any offence while on bail.
Background
The Enforcement Directorate (ED) had received a letter forwarding a Mutual Legal Assistance Request (MLA) from the U.S. Department of Justice, Washington in which a request for legal assistance was sought. In the MLA, it is alleged that one Vishal Moral (petitioner/accused), an Indian National, has committed an offence of wire fraud, access device fraud, computer fraud and money laundering.
As per MLA, victim was living in Leawood, Kansas, U.S.A. reported to the U.S. authorities that between August 14, 2022 and August 15, 2022, crypto currencies worth approximately US$ 527,615.45 had been fraudulently transferred from the virtual currency addresses of the victim’s Ledger Hardware Wallet.
The victim downloaded and installed the Ledger Live software, a companion software for managing crypto wallets like the Ledger Hardware Wallet maintained by the victim, from the internet onto a laptop. The victim connected the Ledger Hardware Wallet to the laptop and made certain cryptocurrency transactions through the said software. After completing the transfers, the victim promptly disconnected the Hardware Wallet from the laptop.
While the Hardware Wallet of the victim was disconnected, Ethereum and Bitcoins was fraudulently transferred from the wallet of the victim to the address which was associated with India-based cryptocurrency exchange and trading platform WazirX.
The transfers were confirmed by the investigators via blockchain analysis, and a request was made by them to WazirX to furnish the records pertaining to the account. As per the information received from WazirX, it was found that both the addresses were linked to an account belonging to petitioner/accused Vishal Moral. WazirX also provided information regarding the IP addresses from where the account was accessed at the time of the fraudulent transfers which were later found out to be hosted by Reliance Jio Infocomm Limited and Bharti Airtel Limited.
Upon inspection of the laptop, onto which the victim had downloaded and installed the Ledger Live software, the U.S. Investigators identified a compressed folder with a legitimate Ledger Live installer, a file containing installation instructions and a file having a SHA1 hash that matched a known malware capable of obtaining credentials and other information such as private keys or seed phrases, from an infected computer.
The ED received the chats from the seized phone, it was revealed that the accused had been committing the offences along with many individuals, Indian and foreign nationals, including the co-accused/petitioners, Shivang Malkoti and Adnan Nisar who had been assisting Vishal Moral. During investigation, ED also found that the accused persons were converting the stolen cryptocurrency into cash and utilizing it for various purposes including creation of immovable assets.
Summons were issued by the ED to the accused Vishal Moral under Section 50 of PMLA and his statements were recorded. The accused, Vishal Moral was placed under arrest under Section 19 of PMLA. Likewise, summons were issued to Shivang Malkoti and Adnan Nisar as well. Subsequently, they were also arrested.
The accused filed the petition seeking grant of regular bail.
Arguments
The accused contended that the proceedings initiated by the ED against the accused persons are contrary to law as the Special Court, while taking cognizance of the complaint filed by ED and issuing summons to the accused persons, was not even aware of the identity of the victim, nor the MLA request sent by the U.S. authorities was filed by ED. The Court was not even apprised of the contents of either the MLA request or the alleged complaint filed by the unknown victim in the United States, or the subsequent communications between the Government of India and the Respondent. The prosecution is also not aware of the contents of the alleged complaint in the U.S. The Special Court mechanically took cognizance and issued summoning order without considering giving a prima facie finding as to what the complaint in the United States is about or its contents.
The accused argued that ED has relied upon Section 2(1)(ia) of PMLA which recognizes the laws of foreign countries that correspond to the provisions of the Act and scheduled offences. The predicate offences in U.S. correspond to the offences mentioned in Part A of the Schedule. However, he points out that the phrase “corresponding law” has only been used 11 times in the PMLA, and the legislature has been quite specific as to where the said phrase is to be used. The phrase has exclusively been mentioned in provisions which are in relation to attachment and not in those relating to penal action under Sections 3 & 4. The legislative intent behind limiting the use of “corresponding law” in the Act to the provisions for attachment is to enable the relevant authority in India to seize and protect the proceeds of crime of an offence committed abroad till the investigation and trial in the foreign country is concluded.
The department contended that a seizure warrant has also been issued by the United States District Court for the District of Kansas in respect of the entire contents of the WazirX account held in the name of Vishal Moral. A copy of thewarrant has been sent along with the MLA. Therefore, the petitioners cannot presume that there is no corresponding scheduled offence in the US as the information collected by the U.S. Authorities regarding details of Vishal Moral have been corroborated by ED and the information could not have been obtained without investigation into the offences.
The department relied on the Treaty Between The Government of The Republic of India and The Government of The United States of America On Mutual Legal Assistance in Criminal Matters. The preamble of the Treaty expressly provides the intent of the said Treaty which is to extend assistance to each other with investigation, prosecution, prevention and suppression of crimes relating to inter alia economic crimes. Article I of the Treaty wherein it is contemplated that the contracting states shall provide the widest measure of mutual assistance to each other in connection with the investigation, prosecution, prevention and suppression of offences. Once the Government of India has received a request for legal assistance under the Treaty and decides to act upon it, exercise of such discretion by the government and its powers under the Treaty cannot be questioned by the petitioners.
Conclusion – Conditions of Bail
The court held that there is reasonable grounds for believing that the petitioners are not guilty of the offence. On a conspectus of the custody period, the delay in commencement of trial and no likelihood of conclusion of trial anytime in near future, the rigours of Section 45 deserve to be relaxed.
The court held that the petitioners have made out a case for grant of regular bail. The petitioners are enlarged on bail subject to the various conditions.
Firstly, Petitioner/Vishal Moral will furnish a Personal Bond and one surety of the like amount to the satisfaction of the learned Special Court/learned Trial Court/CMM/Duty Magistrate.
Secondly, petitioners shall not leave the country during the bail period without prior permission of this Court.
Thirdly, petitioners shall appear before the Court as and when the matter is taken up for hearing.
Fourthly, petitioners shall provide a mobile number to the I.O. concerned which shall be kept in working condition at all times and they shall not change the mobile number without prior intimation to the Investigating Officer concerned.
Fifthly, petitioners shall join the investigation as and when directed and shall report once in a month to the I.O. concerned.
Sixthly, petitioners shall not dispose of any property without the specific permission of the Special Court.
Lastly, petitioners shall not indulge in any criminal activity and shall not communicate with or come in contact with, or influence any of the prosecution witnesses or tamper with the evidence of the case. In case the petitioners change their addresses, they will inform the I.O. concerned and the Special Court also.
Case Title: Adnan Nisar V/S Directorate Of Enforcement
Citation: BAIL APPLN. 3056/2023
Counsel for Petitioner: Mr. Tanveer Ahmed Mir
Counsel for Respondent: Mr. Zoheb Hossain
