India Flags Hidden Crypto Practices That Mirror Global Exchange Failures

India’s financial watchdogs have reportedly uncovered a troubling trend in the cryptocurrency sector, where client deposits on exchanges are being redeployed without investor knowledge. According to the income tax department’s investigation, platforms routinely use customer tokens for lending, staking, or liquidity enhancement, retaining profits while granting users only the right to sell their holdings. Officials confirmed that terms and conditions often allow such practices, but investors remain unaware when their specific assets are being rehypothecated or commingled. Experts warn that this mirrors risks seen in global failures like FTX, where misuse of client funds triggered massive losses. Enforcement agencies in India admit their inability to intervene, as no explicit regulatory framework restricts exchanges from handling deposits this way.