CoinDCX Co-Founders Arrested in Fraud Probe, Exchange Blames Impersonation Scam

Indian cryptocurrency exchange CoinDCX co-founders Sumit Gupta and Neeraj Khandelwal were arrested on March 20, 2026, in connection with a police investigation into an alleged crypto investment fraud, with the exchange calling the charges “false” and attributing the incident to impersonators using fake CoinDCX branding to defraud investors.

The co-founders were detained in Bengaluru, produced before a magistrate’s court, and remanded to police custody until March 23, according to local media reports. The case stems from a First Information Report (FIR) filed by a 42-year-old insurance consultant from Mumbra, who alleges he lost approximately 710,000 rupees (roughly $85,000) after being lured into a scheme promising 10–12% returns using CoinDCX branding and documents between August 2025 and February 2026.

CoinDCX denied any connection to the alleged fraud, stating that the complainant has no association with its platform and that funds were not routed through its systems. The exchange reported that between April 1, 2024, and January 5, 2026, it had flagged over 1,212 fake websites impersonating its domain.

Incident Details and Legal Proceedings

The Complaint

The FIR, filed on March 16, 2026, names six individuals including Gupta and Khandelwal. The complainant, a 42-year-old insurance consultant from Mumbra in the Thane district of Mumbai, alleges he was defrauded of approximately 710,000 rupees ($85,000) through a fake investment scheme that promised 10–12% returns. Two associates reportedly invested additional amounts, bringing total reported losses to approximately 760,000 rupees ($76,000).

Arrest and Custody

Gupta and Khandelwal were questioned at Bellandur Police Station in Bengaluru on March 19 as part of a Thane Police-led investigation. They were subsequently arrested and produced before a weekend magistrate’s court, which remanded them to police custody until March 23, according to local media reports.

CoinDCX Response and Impersonation Evidence

Exchange Statement

CoinDCX issued a public statement on X on March 21, calling the FIR “false and filed as a conspiracy against CoinDCX by impersonators posing as Founders of CoinDCX.” The exchange stated: “The entire conspiracy falsely claims that funds were transferred in cash to third-party accounts which have no relation to CoinDCX.”

A source close to the matter told Moneycontrol that the fraud was carried out through a fake website using the domain coindcx.pro, which has no connection to CoinDCX, and that the complainant never contacted the exchange directly before filing the report.

Scale of Impersonation Activity

CoinDCX reported that between April 1, 2024, and January 5, 2026, the exchange identified over 1,212 fake websites impersonating its domain. The company said it has been cooperating with law enforcement and continuing efforts to raise user awareness to prevent such incidents.

Industry Context and Regulatory Gaps

Rising Impersonation Fraud

CA Sonu Jain, Chief Risk and Compliance Officer at 9Point Capital, characterized the case as “a classic case of impersonation fraud,” noting such patterns are “increasingly common in the Indian crypto space.” Jain added that “Indian VASPs have repeatedly cautioned users and flagged such fraudulent websites to law enforcement,” and that “founders being called for questioning in such cases should not be mistaken for culpability,” describing it as a procedural step once an FIR is registered.

Regulatory Landscape

Jain pointed to broader structural issues: “The larger issue is the absence of clear regulatory standards and investor protection frameworks in India.” He noted that gaps in oversight allow such incidents to persist, calling for regulators to define platform responsibilities, enable faster takedown of fraudulent domains, and formalize coordination between the Financial Intelligence Unit-India (FIU-India), Indian Cyber Crime Coordination Centre (I4C), CERT-In, and crypto exchanges to proactively curb scams.

Vedang Vatsa, Founder of global crypto community Hashtag Web3, commented: “Whatever the outcome here, it would be worth reflecting on whether enough is being done around financial literacy and due diligence across the board, by users, builders, and regulators.”

CoinDCX Recent History and Financial Background

2025 Treasury Breach

The arrests follow a difficult period for CoinDCX. In July 2025, the exchange disclosed a $44.2 million treasury breach in which attackers siphoned funds from an internal operational wallet using compromised credentials. A Bengaluru-based software engineer at the firm was arrested for allegedly enabling the hack after being tricked into installing malware through a fake job offer. CoinDCX covered the loss from its treasury and stated that customer assets were unaffected.

Company Profile

CoinDCX was founded in 2018 by Gupta and Khandelwal, both IIT Bombay alumni. The exchange became India’s first crypto unicorn in 2021 after raising $90 million at a $1.1 billion valuation. It currently claims over 20 million registered users and $165 billion in annualized transaction volume. In October 2025, CoinDCX announced a minority stake investment from Coinbase Ventures, valuing the company at $2.45 billion, with India’s Competition Commission approving the acquisition in December 2025.

Frequently Asked Questions

What are the allegations against CoinDCX co-founders?

CoinDCX co-founders Sumit Gupta and Neeraj Khandelwal were arrested following a police FIR filed by an individual who claims to have lost approximately $85,000 through a fraudulent investment scheme that allegedly used CoinDCX branding and promised 10–12% returns. CoinDCX has denied the allegations, stating the fraud was perpetrated by impersonators using fake websites and that the complainant has no association with the exchange.

How does CoinDCX explain the situation?

CoinDCX attributes the case to impersonation fraud, noting it has reported over 1,212 fake websites impersonating its domain since April 2024. The exchange states that the complainant’s funds were not routed through its systems and that the co-founders were named in a conspiracy by impersonators posing as the company’s founders.

What is the current status of the legal proceedings?

Gupta and Khandelwal were arrested on March 20, 2026, and remanded to police custody until March 23 by a magistrate’s court. The investigation is ongoing, and the exchange has stated it is cooperating with law enforcement.