Investigation Reveals Extensive Misuse of Crypto Platforms
A global investigation, led by the International Consortium of Investigative Journalists (ICIJ) and The Indian Express, has uncovered a significant misuse of cryptocurrency exchanges in India, with stolen funds amounting to approximately Rs 623.63 crore being routed through these platforms. Over a period of 21 months, the Home Ministry’s Indian Cyber Crime Coordination Centre (I4C) identified 27 crypto exchanges allegedly involved in facilitating these illicit transactions. These findings highlight how cybercriminals are converting stolen money into cryptocurrency and moving it across international borders, affecting nearly 2,872 victims between January 2024 and September 2025.
The Coin Laundry project, involving 113 journalists from 38 newsrooms, spent ten months tracing the global rise of crypto exchange misuse. The investigation mapped out how digital assets have become a new pathway for illegal money transfers between countries, exploiting the speed and anonymity offered by the technology.
Methodology of Criminal Exploitation
Investigators examined 144 cybercrime cases involving Indian victims. The common pattern observed was the immediate conversion of stolen funds into cryptocurrency. These digital assets were then moved through a series of wallets, mixing services, and offshore exchanges, often disappearing within minutes. The report notes that cryptocurrency exchanges, operating in a regulatory grey zone and utilizing technologies that outpace policy development, have emerged as the latest gateways for illicit money to traverse borders.
Despite the public nature of blockchain records, the identities of the individuals behind these transactions remain obscured. This combination of rapid transaction speeds and anonymity has made digital tokens a favored instrument for fraudsters, ransomware groups, drug syndicates, and networks seeking to evade sanctions.
Notable Case: A Russian National's Connections
One particularly noteworthy case involved a Russian national implicated in crypto-related crimes. This individual reportedly had surprisingly close ties to India's entertainment and investor communities. Investigations revealed his involvement in a film project that featured Kevin Spacey and Disha Patani, his organization of investor events targeting Indians, and his attendance at a Mumbai birthday celebration for Maye Musk, Elon Musk's mother. Authorities suggest that this public persona concealed his connections to international money laundering networks.
India's Regulatory Challenges
Despite the increasing popularity of cryptocurrency among Indian investors, official policy has lagged behind. The government has expressed caution regarding the regulation of the sector, fearing that such measures might be perceived as an endorsement. An official explanation suggests that stringent regulation could "draw more investors into an asset seen as volatile and systemically risky."
The Finance Ministry is in the process of developing a discussion paper on the matter, but it is still in its nascent stages. Meanwhile, enforcement agencies are encountering practical difficulties. One prominent agency has been compelled to temporarily store approximately $4 million worth of seized cryptocurrency with a private custody service due to the absence of a secure government system for safeguarding digital assets.
For individual investors, the lack of clear regulations means they are left unprotected in the event of an exchange collapse or withdrawal freezes. There is currently no recourse through the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), or a dedicated grievance redressal system.
Pressure on Crypto Exchanges
Indian crypto exchanges report a challenging operating environment. Unclear regulatory frameworks, coupled with significant taxation, including a 1% Tax Deducted at Source (TDS) on every transaction and a 30% tax on capital gains, have led to a decline in domestic trading. Between April 2022 and July 2023, trading volumes on Indian platforms plummeted by approximately 97%. A substantial amount of activity, estimated at Rs 35,000 crore, has shifted to offshore exchanges that operate without adhering to Indian regulatory requirements.
A majority of the prominent Indian crypto platforms, such as WazirX, CoinDCX, Mudrex, CoinSwitch, Pi42, Onramp, and BitBNS, are incorporated through foreign entities. While founders state this is a common practice in the global fintech industry, several acknowledge that India's uncertain policy landscape significantly influenced their decisions.
Global Context of Crypto Exchange Fines
Globally, cryptocurrency exchanges have incurred over $15.6 billion in fines and penalties over the past nine years. The enforcement of regulations is inconsistent, a point underscored by the report's mention of "President Donald Trump’s recent pardon of Binance founder Changpeng Zhao after he pleaded guilty to money-laundering offences."
The Coin Laundry investigation illustrates how digital currencies have fostered a borderless financial ecosystem, enabling illicit funds to move at a pace that often outstrips governmental response capabilities.
Future Outlook for Regulation
India now confronts the same critical question that many nations are grappling with: how to effectively regulate a system that evolves more rapidly than existing legal frameworks. The forthcoming months, particularly the Finance Ministry's subsequent actions regarding the discussion paper, will be pivotal in determining whether India implements more robust rules for the crypto sector or continues to address money laundering cases long after the funds have been moved to wallets abroad.