ED raids CoinDCX, Delta offices over alleged exchange violations
What's the story
The Enforcement Directorate (ED) has raided the offices of cryptocurrency platforms CoinDCX and Delta Exchange in Bengaluru. The action was taken on November 4 and 5 under Section 37 of the Foreign Exchange Management Act (FEMA), 1999. The raids were conducted over allegations of unauthorized cross-border financial transactions involving cryptocurrency and Real World Asset (RWA) tokens.
Probe details
Investigation launched into CoinDCX, Delta Exchange
The investigation was triggered by reports of large-scale FEMA violations by Neblio Technologies Private Limited, which runs CoinDCX, and Excelium Technologies Private Limited, which operates Delta Exchange.
The ED said both platforms were allegedly offering products like cryptocurrency futures and options (F&O), as well as trading in tokenized stocks of foreign companies without the necessary authorization.
Transaction methods
Raids reveal extensive cryptocurrency trading services offered by platforms
The ED's preliminary inquiries and intelligence suggested that the platforms used stablecoins like USDT to conduct derivative trading and tokenized stock transactions through foreign cryptocurrency exchanges such as Binance, KuCoin, Gate.io, and Bybit.
The raids revealed both CoinDCX and Delta Exchange provided spot trading, cryptocurrency derivatives, and tokenized stock trading services to their customers.
Transaction routing
CoinDCX allegedly routed user funds to foreign exchanges
The ED alleged that CoinDCX was routing user funds to foreign cryptocurrency exchanges by converting Indian rupees into stablecoins like USDT.
Users would deposit money in rupees on CoinDCX and place orders for spot trading.
The platform would then convert these funds into USDT and send them to foreign exchanges like Binance, KuCoin, and Gate.io for order execution.
Regulatory evasion
Transfers routed through Costa Rica-based entity on foreign exchanges
The ED claimed these transfers were routed through an account in the name of a Costa Rica-based entity on foreign cryptocurrency exchanges.
This entity was described as a "paper entity" allegedly used to circumvent the regulatory framework governing cross-border money transfers.
The transactions were also reportedly being carried out directly through CoinDCX's application programming interfaces (APIs).
Trading facilitation
Cryptocurrency futures and options trading facilitated by CoinDCX
The ED also alleged that CoinDCX facilitated cryptocurrency futures and options trading by opening one-to-one positions on foreign exchanges such as Binance, KuCoin, Bybit, and Gate.io through accounts in the name of the Costa Rica-based entity.
When users opened or closed positions on CoinDCX, corresponding positions were allegedly opened or closed on these foreign platforms with settlements taking place overseas.
Stock trading
Tokenized stocks of foreign companies traded on CoinDCX
The ED also found that CoinDCX was offering trading in tokenized stocks of foreign companies such as Apple, Google, and Tesla.
However, these transactions were actually derivative trades on Hyperliquid, a foreign-based decentralized cryptocurrency trading platform.
The agency said users deposited money in Indian rupees on CoinDCX and placed orders for global futures stocks.
The platform then converted the funds into USDT and opened corresponding positions on Hyperliquid.