Karnataka High Court Overturns Orders to Unfreeze Startup Jar's Accounts

The Karnataka High Court has overturned three lower court orders that directed the release and unfreezing of bank accounts linked to the wealthtech startup Jar. The decision impacts Jar Gold Retail and its digital gold investment operations.

The court ruled that police do not require prior permission from a magistrate to freeze a bank account as an investigative and preservative measure. However, the police must "forthwith" report the action to the jurisdictional magistrate. The High Court distinguished this from asset attachment, which requires a more involved judicial process.

The court stated that requiring judicial approval before every bank account freeze could hinder investigations, particularly in cybercrime cases where funds can be moved rapidly. It also noted that while digital gold is not directly regulated by the RBI and SEBI, such transactions are not outside the reach of criminal law. This comes after SEBI warned about the risks of digital gold products.

Jar, founded in 2021 by Nishchay AG and Misbah Ashraf, operates a digital savings platform allowing users to invest in digital gold. The company has over 35 million users and has faced regulatory scrutiny over its gold business. A previous appeal by the company's management was dismissed, and the high court has now overturned the lower court's earlier rulings.