High Court Refuses to Quash PMLA Proceedings Against Company Used to Layer Proceeds of Crypto Fraud:

The Gauhati High Court has dismissed a petition filed by Jyotisha Technology Pvt. Ltd. seeking quashing of proceedings initiated by the Enforcement Directorate under the Prevention of Money-Laundering Act, 2002 (PMLA). The Court held that even where a person is not named in the scheduled offence, prosecution under the PMLA can continue if there is prima facie material showing involvement in handling or layering the proceeds of crime.

The petitioner company challenged the Enforcement Directorate's provisional attachment order, prosecution complaint, and summoning order issued in connection with an investigation arising out of the alleged HPZ Token cryptocurrency investment scam.

According to the ED, funds collected from investors through the fraudulent crypto scheme were layered through several shell entities before being converted into cryptocurrencies and transferred to foreign wallets. The ED alleged that the petitioner company was one such entity used to route and conceal the proceeds of crime.

The petitioner argued that it was neither named in the scheduled offence nor connected with the alleged proceeds of crime. It argued that the prosecution complaint lacked evidence establishing any nexus with the predicate offence and that the proceedings were initiated merely on assumptions. The company also challenged the validity of the summoning order and attachment proceedings.

The Gauhati High Court dismissed the petition and declined to interfere with the proceedings initiated by the Enforcement Directorate.

The Court held that the offence of money laundering under Section 3 of the PMLA is distinct from the scheduled offence. Once a scheduled offence exists and there is prima facie material indicating that the proceeds of crime were concealed, layered or projected as untainted property, the ED is competent to investigate every person involved in such activities, irrespective of whether that person is named in the predicate offence.

The Court found that the prosecution complaint disclosed prima facie material indicating that the petitioner company functioned as one of the entities through which the proceeds of crime were routed and layered. At the stage of considering a petition for quashing, the Court is not required to conduct a mini-trial or assess the sufficiency of evidence but only to examine whether the complaint discloses the ingredients of the alleged offence.

The High Court also observed that the challenge to the summoning order was not maintainable under Section 528 BNSS since the petitioner had an effective statutory remedy of revision. Likewise, the challenge to the Adjudicating Authority's order was held to be premature because the PMLA provides a complete appellate mechanism. Consequently, the Court dismissed the petition.