The Lahore High Court has confirmed pre-arrest bail for three men accused in a cryptocurrency fraud case. The court ruled that the Virtual Assets Act, 2026 cannot be applied retrospectively to transactions carried out earlier.
LAHORE: The Lahore High Court has confirmed pre-arrest bail for three men accused in a cryptocurrency fraud case, ruling that Pakistan’s later virtual assets law cannot be applied to transactions that took place before it came into force.
Justice Tariq Saleem Sheikh issued the order on a petition filed by Hammad Ali and two other men in a case registered by the Federal Investigation Agency under sections 419, 420, 468 and 471 of the Pakistan Penal Code and sections 13 and 14 of the Prevention of Electronic Crimes Act.
The case stems from a complaint by Muhammad Farhan, who said he invested around 270,000 USDT, valued at more than Rs68.66 million, through multiple peer-to-peer merchants on a cryptocurrency trading platform. He alleged that after repeated losses and further investments, the platform froze his cryptocurrency accounts, leaving his digital assets inaccessible.
During the inquiry, investigators found that the complainant had conducted 351 transactions through 237 bank accounts and transferred over Rs68.66 million to various individuals in exchange for USDT. The three petitioners were accused of receiving comparatively small sums ranging from Rs45,000 to about Rs499,500.
The defence argued that the petitioners acted only as peer-to-peer merchants who received rupees and transferred matching USDT through Binance’s P2P system. Their counsel maintained that they neither owned nor controlled the platform and had no role in freezing the complainant’s accounts.
An assistant attorney general opposed the bail plea, arguing that the matter related to 2021 to 2023, when virtual currencies or tokens were not legal tender in Pakistan and no person or entity had been authorised or licensed by the State Bank of Pakistan for their issuance, sale, purchase, exchange or investment.
Regulators’ view examined
Before deciding the matter, Justice Sheikh sought input from the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan and the Pakistan Virtual Assets Regulatory Authority on the legal status of cryptocurrencies in the country.
The judge noted that the three regulators agreed that virtual assets are not legal tender and do not fall within existing categories of currency, foreign exchange, commodities or securities under Pakistani law. He also observed that the State Bank’s 2018 circular barring banks and financial institutions from dealing in virtual currencies applied to regulated entities and did not criminalise private peer-to-peer transactions.
The ruling said the Virtual Assets Act, 2026 introduced a specific framework for regulation, but it could not be enforced retrospectively for earlier dealings. The court further found that investigators had not established the basic elements of cheating, forgery or electronic fraud against the petitioners.
Justice Sheikh observed there was no material showing that the men induced the complainant to invest, misrepresented the platform’s legitimacy, manipulated electronic data or took part in freezing the accounts. Since the case was based mainly on documentary and electronic material already in investigators’ possession, the court held that custodial interrogation was not required.
The interim pre-arrest bail earlier granted to the three petitioners was confirmed, subject to each furnishing fresh surety bonds of Rs1 million.
