Indian Law Agency Freezes $8.1M In WazirX Funds As Part Of Anti-Money Laundering Investigation

The Enforcement Directorate (ED), tasked by the Indian government with investigating major financial crimes, announced on Friday that it has frozen assets worth $8.1 million in cryptocurrency exchange WazirX as part of an investigation into fraud involving direct personal loans.

WazirX transferred laundered money to unknown crypto wallets

The ED alleged that WazirX helped 16 fintech companies, already under investigation by the agency, launder the proceeds of crime by transferring the funds to unknown foreign wallets, as the crypto exchange encouraged ambiguity and lax anti-money laundering standards ( AML).

The company that owns WazirX has a web of agreements with Binance

Citing its investigation, the ED further alleged that Zanmai Labs Pvt Ltd, the company that owns WazirX, has created a web of agreements with Crowdfire Inc. USA, Binance and Zettai Pte Ltd. Singapore to cover up ownership of the crypto exchange.

“Previously, their (WazirX) Managing Director, Mr. Nischal Shetty, had claimed that WazirX is an Indian exchange that manages all crypto-crypto and INR crypto transactions and only has an IP and preferential agreement with Binance. But now Zanmai claims that they are only involved in INR crypto transactions and all other transactions are done by Binance on WazirX. They provide conflicting and ambiguous answers to evade oversight by Indian regulatory authorities,” the agency said.

The ED said it conducted a search under India’s Prevention of Money Laundering (PMLA) Act and found that Sameer Mhatre, a co-founder of WazirX, had full remote access to the company’s database, but did not provide details on the transactions related to the crypto assets allegedly purchased from the crime proceeds of Instant Loan APP fraud.

Loose regulatory control over transactions between WazirX and Binance

The agency further said that WazirX could not provide an explanation for the lost crypto assets due to the loose regulatory control over transactions between WazirX and Binance, a lack of blockchain transaction registration to save money, and failure to register the KYC information of the opposite purses.

In response to the ED’s move, WazirX co-founder and CEO Nischal Shetty wrote in a Twitter thread that Binance has acquired his company and that Zanmai Labs, an Indian entity owned by him and other co-founders, has a license from Binance had to exploit INR-Crypto. pairing in WazirX.

“Binance exploits crypto to crypto pairs, handles crypto withdrawal. Binance owns the WazirX domain name. Binance has root access from AWS servers. Binance has all the Crypto assets. Binance has all the Crypto profits. Don’t confuse Zanmai and WazirX,” Shetty claimed.

Interestingly, Binance CEO Changpeng (“CZ”) Zhao said that his crypto exchange does not own any shares in Zanmai Labs, the entity that runs WazirX and was founded by the original founders.

“On November 21, 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 that operates WazirX,” said Zhao.

“Binance only provides wallet services for WazirX as a technical solution. There is also integration using off-chain tx, to save on network costs. WazirX is responsible (for) all other aspects of the WazirX exchange, including user login, KYC, trading and initiating withdrawals,” he added.

Zhao has yet to respond to Benzinga when asked to explain his stance on Shetty’s claim that WazirX was acquired by Binance and the exchange had root access to WazirX’s AWS servers and crypto assets.

Photo: FGC via Shutterstock

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