Cryptocurrency exchange platform WazirX bank assets worth Rs 64.67 crore were frozen after the Enforcement Directorate on Friday conducted searches. The searches were done in connection with a case of the crypto exchange platform assisting accused instant loan app companies in the laundering money via purchase and transfer of virtual crypto assets.
"Directorate of Enforcement (ED) has conducted searches on one of the Directors of M/s Zanmai Lab Pvt Ltd which owns the popular Crypto-currency exchange WazirX and has issued a freezing order to freeze their Bank balances to the tune of Rs 64.67 crore," the probe agency said in a statement.
The federal agency said it conducted raids against a director of Zanmai Lab Pvt Ltd, which owns WazirX, on August 3 in Hyderabad and alleged he was "non-cooperative".
"Because of the non-cooperative stand of the Director of WazirX exchange, a search operation was conducted under PMLA on 3.8.2022 and it was found that Mr 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," ED stated.
The agency's probe against the crypto exchange is linked to its ongoing investigation against a number of Chinese loan apps (mobile applications) working in India.
ED also pointed out that after the criminal investigation began, many of these fintech apps have shut shop and diverted away the huge profits earned using the above modus operandi. "While doing fund trail investigation, ED found that large amount of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. These companies and the virtual assets are untraceable at the moment."
Additionally, ED has also sent summons to these crypto exchanges. "It is seen that maximum amount of funds were diverted to WazirX exchange and the crypto-assets so purchased have been diverted to unknown foreign wallets," it said.
Further, ED also said that Zanmai Labs Pvt Ltd - 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."
"Earlier, their Managing Director Nischal Shetty had claimed that WazirX is an Indian exchange which controls all the crypto-crypto and INR-crypto transactions and only has an IP and preferential agreement with Binance. But now, Zanmai claims that they are involved in only INR-crypto transactions, and all the other transactions are done by Binance on WazirX. They are giving contradictory and ambiguous answers to evade oversight by Indian regulatory agencies," it stated.
Further, WazirX works from a Cloud based software (@AWS Mumbai), all employees work from home, the registered office is a 2 Chair co-working Wework space, and all crypto-crypto transactions are controlled by Binance (which is again without any known office, any known employee and rarely responds to queries on email@example.com), ED revealed.
"Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech app companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also."
Also, WazirX informed that prior to July 2020, they did not even record the details of the bank account from which funds were coming into the exchange to purchase crypto assets, ED said, adding that no physical address verification is done. "There is no check on the source of funds of their clients. No EDD is done. No STRs were raised," it stated.
Therefore, the ED said, equivalent movable assets to the extent of Rs 64.67 crore lying with WazirX were frozen under the Prevention of Money Laundering Act (PMLA).
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