LAHORE: The Lahore High Court (LHC) has confirmed the pre-arrest bail of three men accused in a cryptocurrency-related fraud case, observing that the existing legislation in the country does not retrospectively determine criminal liability for the transactions taken place before its enactment.
Justice Tariq Saleem Sheikh issued the judgment deciding a pre-arrest bail petition filed by Hammad Ali and two others in an FIA case registered under sections 419, 420, 468 and 471 of the Pakistan Penal Code and sections 13 and 14 of the Prevention of Electronic Crimes Act (Peca).
The FIR was registered on a complaint by Muhammad Farhan, who alleged that he had invested approximately 270,000 USDT (United States Dollar Tether) — worth over Rs68.66 million — through multiple peer-to-peer (P2P) merchants on a cryptocurrency trading platform.
According to the complaint, after suffering repeated losses and making further investments, the platform eventually froze his cryptocurrency accounts, making his digital assets inaccessible.
During the inquiry, the FIA found that the complainant had carried out 351 transactions through 237 bank accounts, transferring over Rs68.66 million to various individuals in exchange for USDT.
The three petitioners were alleged to have received relatively small amounts ranging from Rs45,000 to about Rs499,500.
The petitioners’ counsel argued that they merely acted as P2P merchants, receiving Pakistani rupees and transferring the corresponding USDT through Binance’s P2P mechanism.
He maintained that they neither owned nor controlled the cryptocurrency platform nor had any role in freezing the complainant’s accounts.
An assistant attorney general opposed the bail, saying the matter related to the years 2021 to 2023, when virtual currencies/tokens were not legal tender in Pakistan and no person or entity had been authorised or licenced by the State Bank of Pakistan (SBP) for their issuance, sale, purchase, exchange, or investment.
Before reaching any conclusion, the judge sought assistance from the State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP) and the Pakistan Virtual Assets Regulatory Authority (Pvara) to examine the legal status of cryptocurrencies in Pakistan.
The judge noted that all three regulators agreed virtual assets are not legal tender and do not fall within the categories of currency, foreign exchange, commodities or securities under Pakistan’s existing laws.
He further observed that the SBP’s 2018 circular prohibiting banks and financial institutions from dealing in virtual currencies was directed only at regulated entities and did not criminalise private peer-to-peer transactions.
Justice Sheikh held that Pakistan’s subsequent Virtual Assets Act, 2026, created a dedicated legal framework for regulating virtual assets but could not be applied retrospectively to transactions carried out before its enactment.
The judge also found that the prosecution had failed to establish the essential ingredients of cheating, forgery or electronic fraud against the petitioners.
He observed that there was no evidence suggesting they had induced the complainant to invest, misrepresented the legitimacy of the platform, manipulated electronic data or participated in freezing the complainant’s accounts.
Holding that the case primarily rested on documentary and electronic evidence already available to investigators, the judge ruled that custodial interrogation of the petitioners was unnecessary.
The judge confirmed the interim pre-arrest bail previously granted to the petitioners, subject to each furnishing fresh surety bonds of Rs1 million.
Published in Dawn, July 30th, 2026