CoinDCX co-founders arrested: Fraud case, fake websites and what happens next

The Indian crypto ecosystem was sent into a tailspin this weekend following the arrest of CoinDCX co-founders Sumit Gupta and Neeraj Khandelwal. The Thane police apprehended the duo in connection with an alleged fraud case involving over Rs 71 lakh. While the police are investigating a "criminal breach of trust," CoinDCX has hit back, claiming its leadership is being victimised by a sophisticated impersonation scam. Here is a breakdown of the case.

Why were the CoinDCX founders arrested?

The arrests follow an FIR registered on March 16 at the Mumbra police station in Thane. The founders were detained in Bengaluru and brought to Thane, where a local court remanded them to police custody until March 23. They are scheduled to be presented before the court again on March 23, when the police are expected to seek further custody as part of the ongoing investigation.

The case centres on a complaint by a 42-year-old insurance advisor who claims he was duped of Rs 71.6 lakh between August 2025 and March 2026. The complainant alleged he was lured by promises of high returns on crypto investments and lucrative franchise opportunities purportedly associated with the CoinDCX platform.

What are the specific allegations?

According to the police, the complainant transferred the funds through a mix of cash and online transactions. The FIR alleges that the money was misappropriated and the promised returns were never delivered. The authorities have invoked provisions of the Bharatiya Nyaya Sanhita (BNS), focusing on charges of cheating and financial fraud.

How has CoinDCX responded to the arrests?

CoinDCX denied all allegations, labelling the FIR "false" and a "conspiracy." In a statement on X, the exchange clarified that the fraud was carried out by scammers using fake websites and posing as the founders.

The company said that it does not accept cash transfers to third-party accounts, which was a key element of the complainant’s story. The crypto exchange also revealed it has reported over 1,212 fake websites impersonating its brand between April 2024 and January 2026.

What is the ‘fake website’ angle?

The crux of CoinDCX's defence is that the victim interacted with a fake platform rather than the official exchange. Brand impersonation has become a major headache for Indian crypto firms. Scammers often build near-identical replicas of popular sites to harvest credentials or trick users into sending funds to private wallets or cash-collection agents.

Has CoinDCX faced security issues before?

The exchange has had a turbulent year leading up to this legal battle. In 2025, CoinDCX suffered a major cyberattack in which hackers breached an internal operational account and stole assets valued at approximately $44 million.

At the time, the company maintained that user funds remained safe and that security protocols were being overhauled to prevent future breaches.

What happens next?

The investigation is ongoing, with police examining financial transactions, communication trails and the role of alleged intermediaries.

A key question for authorities will be whether the fraud was directly linked to CoinDCX’s systems or entirely the result of impersonation by third parties. The case also highlights the broader regulatory and enforcement challenges in India’s fast-evolving cryptocurrency ecosystem.