Indian Court Grants Bail to CoinDCX Co-Founders in Fraud Case, Citing Prima Facie Lack of Evidence

An Indian court has granted bail to the co-founders of CoinDCX, after ruling that no prima facie case had been established against them in a fraud complaint tied to the alleged misuse of the exchange’s brand by impersonators.

A magistrate court in Thane district, Maharashtra, on Tuesday ordered the release of CoinDCX co-founders Sumit Gupta and Neeraj Khandelwal, who had been arrested last week in connection with an alleged Rs 71.60 lakh (approximately $86,000) cheating case.

The court granted bail on a surety of Rs 50,000 each, citing the legal principle that “bail is the rule, jail is the exception,” and noting that, based on the material before it, the applicants were entitled to relief because no prima facie case had been made out against them.

The ruling comes as Indian authorities continue investigating a broader fraud case in which multiple individuals allegedly impersonated CoinDCX executives and used the company’s name to solicit funds from investors.

Court Notes Complainant Did Not Know the Founders

The case stems from a First Information Report (FIR) filed on March 16 at Mumbra police station in Thane district against Gupta, Khandelwal, and four others under charges including cheating, criminal breach of trust, and fraud.

According to police, the complainant — a 42-year-old insurance advisor from Mumbra — alleged he was defrauded of Rs 71,60,015 between August 2025 and March 2026 after being persuaded to invest in a purported franchisee-style partnership linked to CoinDCX and promised high returns.

The complainant said he transferred the funds through a combination of cash and online transactions, but did not receive the promised returns and alleged the money was misappropriated.

However, the case shifted after the complainant submitted an affidavit stating that he had recovered the disputed amount from one of the other accused and that he did not personally know the arrested CoinDCX co-founders.

That affidavit became a central factor in the bail proceedings, with the court subsequently moving the founders to judicial custody before hearing and approving their bail application.

Defense Says Fraudsters Impersonated CoinDCX Leadership

Counsel for Gupta and Khandelwal argued that the co-founders had no direct role in the alleged fraud and were not the individuals who had met the complainant.

The defense told the court that the real perpetrators had impersonated the CoinDCX founders and used both the executives’ names and the company’s brand to carry out the alleged scam. Lawyers also argued that the founders were elsewhere at the time of the alleged meetings and were themselves victims of identity misuse.

Police Continue Probe Into Four Other Accused

While granting bail, the court directed Gupta and Khandelwal to cooperate with the ongoing investigation.

Police said the probe remains active despite the complainant’s affidavit, and authorities are continuing efforts to locate and arrest the remaining four accused named in the FIR.

The arrests of the CoinDCX founders were made in Bengaluru on March 21 before they were brought to Thane. They were initially remanded to police custody before being transferred to judicial custody and later released on bail.

In a statement issued earlier this week, CoinDCX said the FIR against its co-founders was false and described the case as part of a wider conspiracy involving impersonators posing as CoinDCX founders to defraud members of the public.

The company said it had already taken steps to warn users that its brand was being targeted by fraudsters and emphasized that the alleged transfers were made to third-party accounts unrelated to CoinDCX.

Why It Matters

The case underscores a recurring challenge for crypto platforms in emerging markets: fraud schemes that exploit well-known exchange brands and executive identities to lure retail investors into off-platform transactions.

For the digital asset sector, the incident highlights the legal and reputational risks created when brand impersonation intersects with loosely understood retail investment schemes, particularly in jurisdictions where crypto awareness is rising faster than investor protection mechanisms.

While the court’s bail order does not resolve the underlying criminal investigation, it does suggest that Indian courts may distinguish between platform operators and third-party fraudsters where evidence points to impersonation rather than direct participation.

For exchanges, the episode also reinforces the need for stronger consumer education, verified communications, and legal recourse against brand misuse as crypto adoption expands.