Karnataka’s Criminal Investigation Department (CID) is investigating digital gold savings startup Jar under Banning of Unregulated Deposit Schemes (BUDS) Act, 2019.
Moneycontrol first reported the development on February 25 in a report titled 'Digital gold savings startup Jar searched by Karnataka CID over potential violations.'
The probe comes at a time when digital gold platforms are gaining popularity among Indian consumers looking to invest small amounts in gold through mobile applications.
Also, read: Digital gold savings startup Jar searched by Karnataka CID over potential violations
Here is what the case is about.
Why has Jar come under the police scanner?
A case was registered against Jar Gold Retail Private Limited at Koramangala police station in Bengaluru on January 16 under BUDS Act. The FIR alleges that company collected money from members of the public through a digital gold savings scheme offered on its mobile application.
According to the complaint, users were encouraged to deposit small amounts regularly through the app and accumulate gold holdings in digital form. Police suspect that collecting money from the public in such a manner without regulatory approval may amount to running an unregulated deposit scheme.
What does the FIR allege?
According to the FIR, users were allowed to open e-accounts on Jar app and deposit money, which was converted into digital gold holdings displayed in their accounts.
Customers were told they could withdraw money or sell their gold holdings whenever they wanted through the platform.
The FIR also alleges that the company encouraged users to bring in new participants by offering referral bonuses of 30-40 percentage.
Investigators suspect that money was collected from multiple users through this system during late 2025 and that the business may have operated without approvals from relevant regulatory authorities. The complaint further alleges that platform is not registered with Securities and Exchange Board of India (SEBI) or any other financial regulator.
Who has been named in the case?
The FIR names Jar Gold Retail Pvt Ltd and its directors: Misbah Ashraf, Sandesh Nahar and Nishchay Babu Arkalgud.
The case was initially registered by Bengaluru police following a preliminary inquiry into the company’s operations.
Why is the CID investigating the case?
The probe was later transferred to Karnataka CID, which handles investigations under BUDS Act.
Police action followed a referral by a Multi-Disciplinary Team (MDT) set up to monitor cases under the law. The MDT includes officials from the Reserve Bank of India (RBI), the Income Tax Department, state revenue authorities and the police.
The team had asked Bengaluru police in November last year to conduct a preliminary investigation into the company and other potential financial fraud cases.
Following the inquiry, Koramangala police registered FIR and CID later carried out searches at premises linked to the company.
What’s Jar’s take?
Jar says it is not running a deposit scheme but only operates a platform that facilitates the purchase and sale of gold through its mobile app.
In a statement to Moneycontrol, the company said it respects the legal process and is cooperating with authorities in the ongoing investigation. Jar told Karnataka High Court that the legal provisions cited by investigators do not apply to its business model.
According to the company, users buy gold through the app as a commercial transaction, and the gold is stored with third-party vaulting firm Brink’s, with the customer’s consent.
Jar says the gold is audited and insured, and customers can sell it, redeem it, take physical delivery or convert it into jewellery at any time. The company added that all gold sold through its platform is accounted for and stored in Brink’s vaults.
What triggered regulatory concerns?
The police complaint refers to alerts issued by financial regulators about the digital gold sector.
An RBI market surveillance alert issued on July 20, 2025 reportedly raised concerns about the legality of the company’s business model.
Separately, SEBI issued a public warning on November 8, 2025, stating that trading in digital or e-gold products is currently an unregulated activity.
Police say the company allegedly offered investment opportunities through its app without obtaining regulatory approvals.
How large is Jar’s business?
According to information cited in the FIR and court filings, more than 3 crore users have opened digital accounts on the Jar platform.
The company has reportedly collected over Rs 100 crore from customers through its digital gold transactions.
Jar, founded in 2021, has grown rapidly and claims to have generated a turnover of around Rs 4,000 crore over the past five years.
What has Jar argued in court?
Jar Gold Retail Pvt Ltd has challenged the police probe in Karnataka High Court, arguing that it is not running a deposit scheme.
The company says it operates only as a micro-savings and investment platform through its mobile application.
Its counsel told the court that the company facilitates purchases of digital gold through partner firms and that the gold is stored in third-party vaults operated by Brink’s India.
The firm also said that all payments are made through UPI and that it has over 3 crore users. It argued that no customer has filed a complaint alleging non-delivery of gold or failure to return money.
The company further stated that digital gold products are widely distributed through multiple platforms, including banks and fintech firms.
What did the Karnataka High Court say?
Karnataka High Court refused to quash the FIR and allowed the investigation to continue.
Justice M Nagaprasanna observed that the absence of direct regulatory oversight by RBI or SEBI over digital gold transactions does not automatically place such activities outside the scope of BUDS Act.
The court stated that financial frauds are increasingly evolving into complex structures involving commodities, digital assets and other instruments rather than simple cash deposits.
It also cited online complaints and allegations that physical gold could not be traced when demanded by some users, stating that such claims require investigation.
Given these factors, the court held that the allegations raise serious issues that warrant a detailed probe.
What happens next?
CID continues to investigate the company’s operations.
Meanwhile, the directors of Jar Gold Retail Pvt Ltd have obtained anticipatory bail from a lower court. The company is also exploring further legal options, including approaching higher courts for relief as the investigation progresses.
What is the BUDS Act?
Banning of Unregulated Deposit Schemes (BUDS) Act, 2019 is a central law aimed at curbing illegal deposit schemes and protecting investors.
It prohibits individuals or companies from collecting deposits from the public without approval from recognised regulators such as the RBI, SEBI, or other authorised authorities.
The law empowers state governments to investigate such schemes, attach properties and initiate criminal proceedings against promoters if the scheme is found to be unregulated or fraudulent.
Is digital gold regulated in India?
Digital gold now does not fall under a specific regulatory framework in India.
While several fintech platforms offer digital gold products that allow customers to buy small quantities of gold online, regulators such as SEBI have warned that trading in digital gold is not formally regulated.
As a result, such products do not carry the same regulatory safeguards as instruments like bank deposits, mutual funds or securities, and regulators have advised investors to exercise caution.
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