Karnataka Bitcoin scam: Funds of arrested used by policeman to show Bitcoin recovery, SIT finds

The special court on Monday rejected Chandradhar’s anticipatory bail plea.

SIT Bitcoin scam findings

According to the SIT probe findings, Chandradhar took Khandelwal into police custody from January 6 to January 19, 2021, and got him to transfer two caches of money from his Paytm account to the Wazirex crypto exchange to purchase Bitcoins.

The SIT has said Chandradhar made Khandelwal transfer Rs 99,000 to Wazirex to purchase Bitcoins from the exchange and later on January 16, 2021, he was made to transfer Rs. 2,53,160 from his Paytm account to purchase a second cache of Bitcoin. The Bitcoin purchased by the accused was shown by the police as recoveries in the investigations, the SIT has alleged.

The case records placed in court by the Crime Branch in 2021 in the hacking cases against Sriki and his associates show that the police claimed to have recovered 0.08627702 BTC from Khandelwal. The amount has been shown as being found in a crypto wallet of Khandelwal and later transferred to a wallet created by another exchange Unocoin Technologies Pvt Ltd under the wallet name “cyber crime” under legal process with a Unocoin founder Harish B V as a witness.

Sources said the Crime Branch could not recover any Bitcoin from Khandelwal who had exhausted all his crypto resources when he was arrested. To compensate, they made Khandelwal purchase Bitcoin with other available resources to show a recovery.

Khandelwal has given a voluntary statement under Section 164 of the CrPC before a magistrate about the events when he was arrested in 2020- 2021.

‘Seized Bitcoin worth Rs 9 crore disappeared’

The SIT also told the special court in the course of its arguments against the grant of bail to Chandradhar that the Crime Branch claimed to have recovered 31 Bitcoin worth Rs 9 crore from Sriki but “there is no trace of the 31 BTC subsequently”.

“The explanation for this missing 31 BTC given by the petitioner is that the accused had manipulated the Bitcoin core application and misled the investigation. However, the petitioner failed to investigate further into this aspect as to how, why and when the accused had tampered with the bitcoin core application,” the SIT informed the court.

The SIT also told the court it had managed to extract data from a One Plus phone belonging to Khandelwal which had been destroyed by Chandradhar during the probe.

Police officer’s arguments

Chandradhar argued in court that the case against him was a result of political vendetta and that the SIT was trying to arrest him “to humiliate him and to tarnish his image”.

The officer claimed others were involved in transferring Bitcoins from the wallet of Robin Khandelwal to their wallets. He also argued that the investigation into four cases filed against Sriki was done by the Crime Branch “under the supervision of Joint Commissioner of Police and Dy. Commissioner of Police, Bengaluru”.

Court verdict

The special court referred to voluntary statements of two accused in the Bitcoin scam case — private cyber expert K S Santhosh Kumar and former Crime Branch inspector Prashanth Babu — to reject Chandradhar’s anticipatory bail plea.

“Under the circumstances, I am of the opinion that custodial interrogation of the petitioner is required. At this stage, he is not entitled for a grant of anticipatory bail,” the court ruled.

The court also said the role played by some of the police officers during the investigation of cases against Sriki following his arrest in November 2020 by the Bengaluru Crime Branch seems like a case of the “fence eating the crop”.

Chandradhar and three of his former Crime Branch colleagues are among the four police officers named by a CID SIT police unit in Karnataka, along with a cyber expert in an FIR alleging illegal confinement, breach of trust by a public servant, and destruction of evidence filed on January 24, 2024, in connection with the Crime Branch’s handling of cases after Sriki’s arrest in November 2020.

The four former crime branch officers accused in the SIT FIR of January 24 are Sridhar Poojar (now a DySP), inspectors Prashanth Babu, Chandradhar S R and Lakshmikanthaiah along with a private cyber expert K S Santhosh Kumar who assisted the probe in the hacker’s case in 2020.

Prashant Babu and Santhosh Kumar, arrested on January 24, were granted bail last month. Lakshmikanthaiah has been arrested and is currently in judicial custody.

Poojar, whose anticipatory bail plea was rejected last month, has evaded arrest by the SIT and has filed a plea in the Karnataka High Court. He has been accused in an FIR by the SIT of assaulting SIT policemen who attempted to apprehend him last month.

Last month, IPS officer Sandeep Patil, who headed the Bengaluru Crime Branch between 2020 and 2021 and was the supervisory officer in the cases against the hacker, appeared before the SIT to provide clarifications on the probe carried out against the hacker under his watch.

The SIT has found digital evidence to suggest that a large amount of Bitcoin from cloud wallets belonging to Sriki was transferred to hardware wallets while the hacker was in police custody.

Srikrishna and Khandelwal were initially arrested by Crime Branch officer Poojar in November 2020 on charges of ordering drugs on the internet using Bitcoin. Sriki’s friends Sunish Hegde and others were initially accused in the Bitcoin for drugs case and later Sriki and Khandelwal were named in the case.

The Crime Branch claimed to have arrested Sriki on November 17, 2020, with the joint commissioner of police (Crime) issuing a public statement on social media on November 18, 2020, but the SIT has alleged that the hacker was in illegal custody from November 14.