August 8, 2022

On August 5, the Enforcement Directorate (ED) froze the bank account of one of the managers of Zanmai Lab Private Ltd, operator of the Indian crypto exchange WazirX.

that it mentioned Bank assets of 64.67 crore (more than $8 million) were frozen after the agency conducted a raid in Hyderabad.

Binance-backed WazirX under investigation

The news comes shortly after Pankaj Chaudhry, Minister of State for Finance, confirmed in the Parliamentary Senate that the Enforcement Directorate was looking into allegations that a total of 2,790 crore (more than $350 million) had been laundered through the Binance-backed exchange in two cases.

This time around, the director of WazirX has reportedly been indicted by the central agency for helping fast-lending app companies purchase and transfer virtual crypto assets used to launder illicit money.

NDTV reported that the raids were conducted on Sameer Mahatri, co-founder and chief technology officer of the platform, adding ED “has full remote access to the WazirX database, but does not provide transaction details.”

Essentially, this means that the raid took place on the principal’s residence under the Prevention of Money Laundering Act 2002 (PMLA) after he had not cooperated with the agency.

is being[In]Crypto also cited previous reports that the ED is investigating the platform in two cases under the provisions of the Foreign Exchange Management Act of 1999 (FEMA). While in one case, the platform is scrutinized to allow foreign users to exchange one cryptocurrency for another on their own exchange as well as using transfers from other foreign exchanges. In another case, “hidden in obscurity” transactions between Binance and WazirX are being investigated.

Allegation of aiding illicit loan applications for money laundering

Another local report The Enforcement Directorate was quoted as saying, “When the police and ED launched a crackdown, loan application companies used the cryptocurrency route to withdraw funds from the country. Most of the funds are transferred to Hong Kong through crypto assets via WazirX. We found evidence regarding the transfer of funds to crypto assets.” We have frozen over Rs 100 crore of WazirX crypto assets.”

WazirX allegedly helped 16 accused fintech companies use the cryptocurrency channel to launder the proceeds of crime.

“By promoting ambiguity and laxity in Anti-Money Laundering (AML) standards, it has actively assisted around 16 accused fintech firms in laundering proceeds of crime using the crypto-pathway. Therefore, the equivalent transferred assets have been frozen to a limit of Rs 64.67 crore dumped on WazirX under the PMLA. 2002,” the Central Agency said.

Now it has also been reported that the investigative agency is tracking Indian non-bank companies and fintech partners for fast loan applications that are operating in accordance with central bank guidelines. These illegal apps have been found to operate in contravention of Reserve Bank of India regulations to extort excessive interest rates and misuse personal information collected from loan applicants.

Several Chinese fund-backed fintech companies have not been able to obtain an NBFC license from RBI to do lending business. So they devised a MOU route with the defunct NBFCs to carry on their license,” the agency have found.

“It is clear that the maximum amount of funds has been transferred to the WazirX exchange and the crypto assets purchased have been transferred to unknown foreign wallets,” the ED note added.

Transactions between Binance and WazirX are still unclear

However, ED is also said to be examining the past data of the exchange and its co-founder. The central agency noted that “previously, its managing director Nischal Shetty claimed that WazirX is an Indian exchange that controls all INR crypto and crypto transactions and only has an IP and a preferential agreement with Binance.”

“But now, Zanmai claims that they are only involved in INR-crypto transactions, and all other transactions are conducted by Binance on WazirX. They are giving contradictory and ambiguous answers to avoid the oversight of Indian regulators,” a CNBC Transfer ED report.

While further investigation is underway, a statement from the exchange is awaited.

The latest tweet earlier today from the company’s general manager, Nischel Shetty, explained how decentralization solves the monopoly problem of centralized enterprises.

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