Karnataka Bitcoin scam: SIT uses C-DAC forensic report, witness statement of Rs 850 crore fraud to counter cops’ bail pleas

Private cyber forensic expert B S Gagan Jain, who assisted the Bengaluru Crime Branch in its probe against hacker Sriki, has also revealed in a statement to a magistrate that there was evidence of the presence of as many as 4,000 Bitcoins – valued at Rs 850 crore in 2020 – on Sriki’s devices after his arrest.

The CID SIT in Karnataka is probing a Bitcoin scam from the BJP government’s tenure (2019-2023) where cryptocurrency and funds worth crores allegedly stolen by Sriki from international exchanges and gaming websites were allegedly siphoned away by policemen, politicians and others after his arrest.

Over the past week, in the course of two separate anticipatory bail hearings for two former Bengaluru Crime Branch police officers – Police Inspector Prashanth Babu and Deputy Superintendent of Police Shridhar Pujar – who investigated the original cases of hacking against Sriki, the SIT has informed the high court and a special court of the C-DAC report and Jain’s statement recorded under Section 164 of the Criminal Procedure Code (CrPC) in February this year.

The Karnataka High Court rejected Babu’s anticipatory bail plea on July 23 and a special court reserved orders on Thursday in a similar plea by Pujar. The two police officers are among several former Bengaluru Crime Branch police officers under investigation by the SIT for possibly extorting and siphoning cryptocurrency worth several crores from Sriki.

While the true extent of the Bitcoin scam has been largely speculated to be in the range of Rs 9 crore to around Rs 63 crore, the SIT has for the first time indicated that it could be worth Rs 850 crore.

The SIT was constituted in June 2023 by the Congress government to probe if a nexus of policemen and politicians under the BJP had extorted crypto funds from Sriki. In statements that are also part of court documents, Sriki has claimed that he had 400 Bitcoins (worth around Rs 63 crore) at the time he was arrested and that he gave all the Bitcoin to the police since he realised that they would invariably find it using forensic tools.

In the course of the hearing of the bail pleas of Babu and Pujar, the SIT told courts in the last few days that they have new evidence of police officials gaining illegal access to Sriki’s electronic devices with the help of cyber experts.

While Babu and Pujar obtained bail and anticipatory bail, respectively, earlier in connection with a case of alleged illegal confinement of the hacker and his associate Robin Khandelwal (before their formal arrest in November 2020), tampering of evidence, and theft of Bitcoin worth Rs 1.86 crore from Khandelwal, they are now under probe for destroying evidence.

What the new findings reveal

The May 21 cyber forensic analysis report from C-DAC has revealed that Babu, who headed the technical cell of the Bengaluru Crime Branch in 2020 and was roped in to assist Pujar who was investigating Sriki, allegedly copied the contents of two MacBooks of Sriki onto his personal laptop.

Babu allegedly installed a crypto hardware wallet, electrum wallet applications, and data wiping applications, the SIT informed the high court and special court.

The special public prosecutor (SPP) for the SIT told the courts that since the C-DAC report categorically indicates wiping off the contents from the personal desktop of Babu, it is necessary to subject the police officers to custodial interrogation “to unearth one of the largest cryptocurrency crimes”.

A July 2023 Forensic Science Laboratory (FSL) report on the MacBooks, hard disk and pen drive seized from Sriki stated that the devices were operated “between 17.11.2020 to 21.11.2020 “ when “the gadgets were supposed to be in a sealed cover”.

During arguments of the police officers’ bail pleas, the SPP for the SIT said that Jain had indicated in his statement that the gadgets seized from Sriki contained details of about 4,000 Bitcoin. “He further submitted that the price of one bitcoin during November 2020 was about $29,000 i.e., approximately Rs 21.20 lakhs. Thus, it is stated that the total value of Bitcoin handled by the petitioner was about Rs 850 crore,” the Karnataka High Court said in its notings of the arguments made by the SIT.

The high court took the new SIT findings into consideration while rejecting Babu’s anticipatory bail plea. The SIT placed the high court order in the special court on Thursday to seek the rejection of Pujar’s bail plea.

“The FSL report which prima facie probablises illegal access to the gadgets, even when they are supposed to be in a sealed condition and the C-DAC report also prima facie discloses that the contents of Apple MacBook were transferred to the desktop in the chamber of the petitioner in Technical Support Centre, which is said to be his personal desktop, which assumes importance,” the high court noted in its July 23 bail rejection order.

“Coupled with the same, the statement of B S Gagan Jain …, was recorded under Section 164 of Cr.P.C. which suggests that the seized gadgets contained 4000 bitcoins and the same was transferred to the personal desktop of the petitioner (Babu) and the same requires consideration,” the high court said. “Such serious revelation in the statement made under Section 164 Cr.P.C cannot be brushed aside or ignored lightly,” a single-judge bench of the high court stated.

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