Money laundering: ED freezes crypto exchange WazirX chief's bank assets
What's the story
The Enforcement Directorate (ED) on Friday froze the bank assets of cryptocurrency exchange WazirX heads in an ongoing money laundering probe. The agency searched the director of WazirX's owner company. Assets worth Rs. 64 crores were frozen for allegedly assisting accused instant loan app companies for laundering fraud money and transferring virtual crypto assets, the ED said.
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WazirX owner company lands in trouble
Binance-owned WazirX has been under investigation for money laundering and allegedly violating the provisions of the Foreign Exchange Management Act, 1999. On Friday, the ED searched one of the directors of WazirX's owners 'Zanmai Lab' and froze his bank assets worth Rs. 64.67 crore. The development comes only two days after Ministry of Finance informed the Parliament that ED is investigating WazirX in two cases.
Twitter Post
What did the ED say?
ED searches the Director of WazirX Crypto-Currency Exchange freezes its Bank assets worth Rs 64.67 Crore for assisting accused Instant Loan APP Companies in laundering of fraud money via purchase transfer of virtual crypto assets.
— ED (@dir_ed) August 5, 2022
Parliament
'Transactions cloaked in mystery'
According to the Ministry of Finance, Zenmai Labs used the walled infrastructure of Binance. Crypto transactions between the two exchanges were not recorded on the blockchains and were thus "cloaked in mystery", the government said. The ED issued a show cause notice under FEMA provisions for allowing "outward remittance of crypto assets worth Rs. 2,790 crore to unknown wallets."
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What else did the ministry say?
"WazirX has also allowed the request of foreign users to convert one crypto to another by using transfer from third-party exchanges namely FTX, Binance, etc," the ministry further added. WazirX was acquired by Binance in 2019. In the last year, the exchange has witnessed a leadership change with co-founder Siddharth Menon parting ways and Nischal Shetty taking a break from day-to-day operations.
NBFC companies
'Crypto assets purchased to launder money'
ED is investigating a number of Non-Banking Financial Company (NBFC) outfits and their fintech partners for violating RBI guidelines and practicing predatory lending. As per the ED, various fintech companies backed by Chinese funds reportedly got NBFC license from RBI for lending business. However, after the investigation began, many fintech apps shut down and transferred funds to purchase crypto assets and launder them abroad.
Information
Maximum funds laundered through WazirX, ED alleges
As per the ED, the maximum amounts of these funds have been sent to WazirX to buy crypto-assets and send them to unknown foreign wallets. "Zanmai Labs - the company owning WazirX - has created a web of agreements with Crowdfire Inc. USA, Binance (Cayman Islands), Zettai Pte Ltd Singapore to obscure the ownership of the crypto exchange," the ED said.