The Central Crime Branch has arrested another co-founder of Bengaluru-based cryptocurrency exchange, Unocoin, which introduced India’s first crypto ATM in Bengaluru that was set to soon become operational.
The recent arrest of Unocoin’s co-founder Sathvik Vishwanath is made after the Bengaluru city police Tuesday arrested startup’s co-founder Harish BV.
The police had then reportedly called the setting up of the crypto ATM — located at Kemp Fort Mall in Bengaluru — illegal and launched without approvals. This time, police suspects Vishwanath to have destroyed evidence — online transaction trails and customers’ details — stored in the laptops, according to ET report.
The police had seized the ATM, laptops, a mobile, at the time of BV’s arrest.
The kiosk was a platform for bitcoin buyers and sellers and hence, illegal, the report cited DCP (crime) S Girish as saying. He added that the transaction involved a cumbersome authentication process, involving PAN and bank details.
The two co-founders have been booked under IT Act section 66 (computer-related offences) and IPC sections 120b (criminal conspiracy), 420 (cheating), 465 (forgery), 474 (possession of forged documents) and 471 (fraudulently using forged documents), the report said.
So, How Did The Crypto ATM Work?
Inc42 yesterday reported that the ATM machine was not yet operational, as maintained by the company on October 21, which reiterated that the machine is still under final testing mode and it will be up and running in the upcoming week.
@Unocoin had tweeted —
Before the Kiosk or the ATM went operational the startup had conducted few trials. The features of the ATM, according to the startup published statement, says —
- The ATM allowed Unocoin and Unodax customers to deposit and withdraw — minimum INR 1,000 — by entering user ID and the OTP.
- Once the user confirmed his/her account details and deposit the funds, the teller machine would then allow to use the deposited funds to buy BTC or ETH.
- To withdraw the sum users obtained by selling crypto assets, they would have to make a request by visiting Unocoin.com or its mobile app. The 12 digit reference number would be sent, which the user could enter along with OTP in the kiosk.
In the statement, it further said: “Due to the RBI’s recent notification on ‘Prohibition on Dealing in Virtual Currencies’, our banking relationships were disrupted some time ago. Since then, we were then in the process of deploying new mechanisms for INR deposits and withdrawals. This was not a small undertaking and it took us some time to deploy new solutions, and now we are here with the implementation of Kiosk.”
RBI, in its April 6, 2018, notification, Prohibition on dealing in Virtual Currencies (VCs), said:
- Reserve Bank has repeatedly through its public notices on December 24, 2013, February 01, 2017 and December 05, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.
- In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.
- Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/ sale of VCs.
- Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.
As a result, a number of cryptocurrency exchanges including Zebpay have shut down their shops. The rest of the exchanges, including Unocoin, announced to go for crypto-to-crypto transactions.
Commenting on the arrest of Unocoin’s co-founders, Siddharth Mahajan, Partner at the Delhi-based law firm Athena Legal, in an email correspondence, said: “The setting up of ATM could be seen as an attempt to bypass the restrictions imposed by RBI by law enforcement agencies. Another aspect could be prevention of fraud where people could trade in banned virtual currencies through such private ATMs or other mechanisms and get defrauded.”
“The founders of Unocoin will have to approach the court for bail and pursue the matter as per law,” he added.
However, at no point of time, either the Indian government or the RBI have announced cryptocurrency as an illegal affair.
Swaroop Anand, an advocate representing directors of Unocoin, in an email statement yesterday told Inc42, “We have always persevered to spread the right information and educate our users on the risks involved. Our faith in the legal proceedings still stands and we are willing to cooperate with the authorities.”
It can be mentioned here that such ATMs dealing with cryptocurrencies are located across many countries including US, Canada, Austria, China, among others.