India arrests five including Crypto Queen in unregulated USDT scam highlights regulatory gaps

Indian authorities have arrested five individuals, including a woman labeled "Crypto Queen," for orchestrating a cryptocurrency-linked fraud that exploited unregulated digital channels to launder stolen funds. The operation, uncovered through a complaint from a 29-year-old Delhi resident, involved luring victims with promises of high returns on online tasks, only to divert their payments into unregulated crypto networks. The scam leveraged Telegram-based platforms and international numbers to obscure the identities of perpetrators and funnel money through "mule" bank accounts before converting it into USDT, a stablecoin pegged to the U.S. dollar [1].

The accused, including 19-year-old Krish, who coordinated fund transfers, and Nidhi Agarwal, the central figure dubbed "Crypto Queen," operated without official licenses. Agarwal, using international communication tools and unregulated vendors, facilitated the conversion of illicit funds into cryptocurrency at a profit. Other suspects, such as Deepa and Gaurav, assisted in recruiting individuals to provide bank accounts for money movement and physical cash transfers. The case highlights a broader trend of crypto-related fraud in India, where the absence of formal regulations has enabled criminals to exploit gaps in oversight [1].

A parallel incident involving a 56-year-old doctor who lost approximately $115,000 to a romance scam further underscores the vulnerabilities in India’s crypto ecosystem. The scam, conducted via WhatsApp, involved a fraudulent profile posing as a medical professional. Initial "returns" on crypto investments lured the victim into larger deposits, which were later inaccessible under fabricated tax demands. Such cases illustrate how scammers leverage trust and misinformation to perpetrate large-scale theft [1].

India’s regulatory landscape remains fragmented despite a 2020 Supreme Court ruling that overturned the Reserve Bank of India’s (RBI) ban on banks serving crypto businesses. While the RBI continues to oppose private cryptocurrencies, citing risks to financial stability, tax authorities have intensified enforcement under Section 115BBH of the Income Tax Act, imposing a 30% tax rate and 1% TDS on crypto transactions. However, the lack of licensing, consumer protections, and real-time monitoring mechanisms has allowed illicit actors to thrive. The absence of a unified framework leaves the sector exposed to abuse, with criminals exploiting weak enforcement to launder funds through stablecoins like USDT [1].

The arrests signal growing scrutiny of crypto-linked crimes but also reveal systemic challenges in curbing such activities without comprehensive regulation. With scams exploiting both technological and social vulnerabilities, authorities face mounting pressure to balance innovation with safeguards. As India grapples with these issues, the need for a structured regulatory approach becomes increasingly urgent to prevent further exploitation of unregulated digital finance [1].

Source: [1] [Delhi’s ‘Crypto queen’ arrested as India struggles with crypto scams and no regulations] [https://coinmarketcap.com/community/articles/688737303c1f324d51532df1/]