- Trending
- Comments
- Latest
The Lahore High Court upheld pre-arrest bail for three men accused in a cryptocurrency fraud case on July 30, ruling that Pakistan’s Virtual Assets Act, 2026 cannot be applied retroactively to transactions conducted before it took effect.
The decision, delivered by Justice Tariq Saleem Sheikh in Lahore on July 30, provides important judicial clarification on how cryptocurrency-related disputes arising before the country’s new regulatory framework should be handled.
The Crypto fraud case originated from an investigation by Pakistan’s Federal Investigation Agency (FIA), which alleged that the accused played roles in transactions connected to an investor who lost access to cryptocurrency worth more than Rs68.66 million.
However, the court concluded that investigators had not established sufficient evidence linking the petitioners to fraud, forgery, or electronic crimes, while also finding that the legal framework introduced in 2026 could not govern transactions conducted years earlier.
Justice Tariq Saleem Sheikh confirmed the interim pre-arrest bail granted to Hammad Ali and two other petitioners, who were booked under Sections 419, 420, 468 and 471 of the Pakistan Penal Code, along with Sections 13 and 14 of the Prevention of Electronic Crimes Act.
The Crypto fraud case centered on cryptocurrency transactions conducted between 2021 and 2023, several years before Pakistan enacted the Virtual Assets Act, 2026.
In his ruling, Justice Sheikh held that the new legislation could not be applied to conduct that predated its enactment.
“The Virtual Assets Act, 2026 introduced a specific framework for regulation, but it could not be enforced retrospectively for earlier dealings.” — Justice Tariq Saleem Sheikh, Lahore High Court
The court also ruled that custodial interrogation of the petitioners was unnecessary because the evidence consisted primarily of documentary and electronic records already in the possession of investigators.
Each petitioner was ordered to furnish a fresh surety bond worth Rs1 million as a condition for the confirmation of bail.
According to court records, complainant Muhammad Farhan told investigators that he invested approximately 270,000 USDT—valued at more than Rs68.66 million—through multiple peer-to-peer (P2P) merchants on a cryptocurrency trading platform.
The Crypto fraud case alleges that after suffering repeated trading losses and making additional investments, his cryptocurrency accounts on the platform were frozen, leaving his digital assets inaccessible.
Investigators found that the complainant carried out 351 transactions through 237 separate bank accounts before transferring over Rs68.66 million to various individuals in exchange for USDT.
The three petitioners, however, were accused of receiving comparatively smaller payments ranging from Rs45,000 to approximately Rs499,500.
The defence argued that the accused merely acted as peer-to-peer merchants by receiving Pakistani rupees and transferring equivalent USDT through Binance’s P2P trading system. Their lawyers maintained that the petitioners neither owned nor controlled the trading platform and played no role in freezing the complainant’s cryptocurrency accounts.
Before issuing its decision in the Crypto fraud case, the Lahore High Court sought legal opinions from the State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP), and the Pakistan Virtual Assets Regulatory Authority regarding the legal status of cryptocurrencies.
The court noted that all three regulators agreed virtual assets are not recognised as legal tender in Pakistan and do not fall within existing legal classifications such as currency, foreign exchange, commodities, or securities.
Justice Sheikh also examined the State Bank’s 2018 circular restricting banks and financial institutions from dealing in virtual currencies.
“The State Bank’s 2018 circular barring banks and financial institutions from dealing in virtual currencies applied to regulated entities and did not criminalise private peer-to-peer transactions.” — Justice Tariq Saleem Sheikh, Lahore High Court
The assistant attorney general opposed the bail application by arguing that cryptocurrencies were neither legal tender nor regulated during the period under investigation.
“Virtual currencies or tokens were not legal tender in Pakistan and no person or entity had been authorised or licensed by the State Bank of Pakistan for their issuance, sale, purchase, exchange or investment.” — Assistant Attorney General, opposing the bail plea
A central issue in the Crypto fraud case was whether the petitioners could be held criminally responsible for losses suffered by the complainant after his cryptocurrency accounts became inaccessible.
After reviewing the available evidence, the court concluded investigators had failed to establish the essential ingredients of cheating, forgery, or electronic fraud against the accused.
Justice Sheikh observed that there was no evidence showing the petitioners persuaded the complainant to invest, falsely represented the legitimacy of the trading platform, manipulated electronic records, or participated in freezing the cryptocurrency accounts.
The ruling effectively reinforces the legal principle that criminal liability must be supported by clear evidence and existing law at the time of the alleged conduct. For Pakistan’s evolving digital asset sector, the Crypto fraud case also underscores the significance of distinguishing between regulatory violations and criminal offences as the country’s cryptocurrency framework continues to develop.
Primary Source: Pakistan Today
Copyright © 2025 - The Bit Gazette.
