Enforcement Directorate (ED) conducted raids against one of the directors of Zanmai Labs, which owns the cryptocurrency exchange WazirX, on Wednesday, 3 August.
Consequently, on Friday, the ED ordered a freeze on the exchange's bank assets worth Rs 64.67 crore for allegedly assisting instant loan app companies in money laundering via purchase and transfer of virtual crypto assets.
"It was found that Sameer Mhatre, Director WazirX, has complete remote access to the database of WazirX, but despite that he is not providing the details of the transactions relating to the crypto assets, purchased from the proceeds of crime of instant loan app fraud," the ED alleged in a statement.
"The lax KYC norms, loose regulatory control of transactions between WazirX and Binance, non-recording of transactions on block chains to save costs and non-recording of the KYC of the opposite wallets has ensured that WazirX is not able to give any account for the missing crypto assets," it added.
The ED said WazirX made no efforts to trace these crypto assets.
"By encouraging obscurity and having lax AML (anti-money laundering) norms, it has actively assisted around 16 accused fintech companies in laundering the proceeds of crime using the crypto route," it said.
'Money Laundering of Rs 2,790 Crore'
This comes days after Minister of State for Finance Pankaj Chaudhary said that the ED is probing alleged money laundering of Rs 2,790 crore through crypto exchange WazirX.
Two cases against WazirX are being investigated under the provisions of the Foreign Exchange Management Act, 1999 (FEMA), he said in a written reply to the Rajya Sabha.
"In one of the cases, investigation done so far has revealed that one Indian Crypto-exchange platform, Wazirx, operated by Zanmai Labs Private Limited in India was using the walled infrastructure of Cayman Island based exchange Binance," Chaudhary said.
"Further, it has been found that all crypto transactions between these two exchanges were not even being recorded on the blockchains and were thus cloaked in mystery," he added.
Binance Refuses Ownership, Twitter Feud Ensues
Hours after the ED ordered the freezing of its assets, Binance said that it does not own a stake in WazirX.
Binance Founder and CEO Changpeng Zhao said the company had no links with WazirX and does not own any stake in Zanmai Labs. “Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders," he said.
“On 21 Nov 2019, Binance published a blog post that it had “acquired” WazirX. This transaction was never completed. Binance has never - at any point - owned any shares of Zanmai Labs, the entity operating WazirX," Zhao added.
However, soon after, a Twitter feud began between him and WazirX founder Nischal Shetty, with the latter saying that the platform was acquired by Binance. “Zanmai Labs has license from Binance to operate INR-Crypto pairs in WazirX," he said. WazirX is “still owned by Binance," Shetty said.
Zhao then replied saying that "Binance does NOT have control on operations including "user sign-up, KYC, trading and initiating withdrawals", as stated earlier."
(With inputs from PTI.)
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