Prosecution Of Cryptocurrency Scams And Digital Asset Fraud
Legal Framework in Nepal
Cryptocurrency is not recognized as legal tender in Nepal. The Nepal Rastra Bank (NRB) has banned its use.
Relevant laws for prosecution:
Muluki Criminal Code (2074): Covers cheating, fraud, and organized crime.
Prevention of Organised Crime Act (2070): Used for large-scale scams and networks.
Foreign Exchange Regulations: Applies if crypto is used to move money across borders illegally.
Key prosecutable acts:
Promising high returns via fake crypto investments.
Operating crypto exchanges or wallets illegally.
Misappropriation of funds through digital assets.
Money laundering using cryptocurrencies.
Case 1: April 2022 – Illegal Cryptocurrency Trading
Facts:
Three men in Kathmandu operated an illegal cryptocurrency trading business.
Transaction value: ~Rs 660 million.
Legal Issues:
Violation of NRB ban on cryptocurrency.
Potential fraud if investors were misled about the legality or returns.
Outcome:
Police arrested all three and began a criminal investigation.
Assets and equipment used in the business were seized.
Significance:
Early enforcement case signaling that both operators and investors could face scrutiny if participating in illegal crypto trading.
Case 2: July 2025 – Foreign Nationals Operating Crypto Scam
Facts:
Two Indian nationals conducted illegal cryptocurrency trading under a business front in Lalitpur.
Estimated scam amount: Rs 1.5 billion.
Legal Issues:
Violation of foreign exchange and NRB rules.
Possible money laundering and fraud.
Outcome:
Arrested and remanded for investigation.
Cash and digital evidence were seized.
Significance:
Demonstrates cross-border dimensions of cryptocurrency fraud in Nepal.
Case 3: July 2025 – Call Center/Dating App Crypto Scam
Facts:
52 people, including six Chinese nationals, ran a call center and dating app to lure victims into illegal crypto investments.
Seized assets: cash ~Rs 14 million, 54 mobile phones, 7 laptops.
Legal Issues:
Fraud by deception, illegal cryptocurrency operations, organized crime.
Outcome:
Arrested and charged with multiple offenses.
Investigation highlighted the role of organized international networks.
Significance:
Hybrid scam combining social engineering with crypto fraud.
Case 4: December 2024 – Misappropriation of Cooperative Funds via Crypto
Facts:
Individuals diverted cooperative funds and invested them in digital assets using Binance and other crypto wallets.
Victims: cooperative depositors.
Legal Issues:
Fraud and misappropriation of funds.
Illegal cryptocurrency trading and potential money laundering.
Outcome:
Charge-sheet filed; ongoing investigation for recovery of funds.
Significance:
Shows intersection of financial institution fraud with cryptocurrency.
Case 5: November 2024 – Alert on Crypto Fraud and Money Laundering
Facts:
The Financial Intelligence Unit (FIU) noted a rise in crypto-related fraud and money laundering targeting Nepali citizens.
Fraudsters used social media, fake investment schemes, and cross-border money movement.
Legal Issues:
Money laundering, cyber fraud, illegal crypto operations.
Outcome:
Authorities increased monitoring and enforcement, leading to arrests and seizures in other cases (like Case 3).
Significance:
Illustrates preventive and regulatory measures as part of prosecution strategy.
Case 6: September 2024 – Youth-led Crypto Hundi Scam
Facts:
Young Nepalis collected remittances from migrant workers via illegal channels and invested them in cryptocurrency abroad.
Operations involved digital wallets and unlicensed fund transfers.
Legal Issues:
Money laundering, illegal foreign exchange, illegal crypto trading.
Outcome:
Arrests made; investigation focused on tracing funds and prosecuting offenders.
Significance:
Highlights how crypto scams can exploit vulnerable populations like migrant workers.
Key Takeaways
Cryptocurrency scams in Nepal often combine fraud, misappropriation of funds, and cross-border money laundering.
Both domestic and foreign operators are prosecuted under multiple statutes.
Seizure of assets (cash, devices, wallets) is crucial in investigations.
Youth and organized networks are often involved in crypto fraud.
Hybrid scams using apps, social engineering, or cooperative funds are increasingly common.
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