The Enforcement Directorate, which investigates financial crimes, raided five locations linked with Indian cryptocurrency exchange CoinSwitch Kuber on Thursday, 25 August, in connection with its probe into money laundering by micro loan apps, reports suggested.
"We are looking into multiple possible contraventions under FEMA and other entities that are connected to it. Since we did not receive the desired cooperation we have conducted searches on (residences) of directors, the CEO and the official premises," an official told CoinDesk.
The exchange did not confirm or deny the raids. It told The Economic Times that it receives queries from various government agencies and that it has always taken the transparent approach.
Multiple Exchanges Under the Scanner
This comes weeks after the ED conducted raids against at least two other exchanges. On 3 August, it raided WazirX Director Sameer Mhatre and subsequently ordered a freeze on the exchange's bank assets worth Rs 64.67 crore.
Then, on 12 August, the agency announced that it conducted searches at various premises connected to Flipvolt cryptocurrency exchange and had frozen its bank balances, payment gateway balances, and crypto balances worth Rs 370 Crore.
Flipvolt Technologies was used by crypto lender Vauld to extend its services to Indian residents.
In WazirX's case, ED alleged that instant loan app companies were able to launder funds by taking advantage of the anonymity offered by off-chain transactions with Binance and lax KYC norms.
"The lax KYC norms, loose regulatory control of transactions between WazirX and Binance, non-recording of transactions on blockchains 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.
WazirX said that it is able to produce KYC details for all off-chain transactions and is cooperating with the Enforcement Directorate.
Read more about the WazirX case here.
Off-chain transactions, simply put, are crypto transactions which aren't recorded on the blockchain, which is a shared ledger that maintains a secure and decentralized record of transactions. They are popular because they are cheaper and faster. Since they aren't visible on the public ledger, they offer even more anonymity to the participants.
(With inputs from The Economic Times and Coindesk)