14 June, 2021
The Enforcement Directorate, in line with its current focus on crypto exchanges and money laundering, on Friday issued show-cause notice to WazirX and its directors Nischal Shetty and Sameer Hanuman Mhatre for allegedly violating foreign exchange laws involving crypto transactions of Rs 2,790 crore.
“The agency has found evidence of non-compliance with forex rules and how users are using the crypto platform to launder money. Similar action is expected against more crypto platforms and their executives this month,” Business Insider quoted a senior official in the agency as saying.
In the WazirX matter, the federal agency issued notice under the Foreign Exchange Management Act (FEMA) following an ongoing money-laundering probe into Chinese-owned illegal online betting applications.
It tweeted on its website: “ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.”
According to the ED, some Chinese nationals have allegedly laundered Rs 57 crore by converting rupees into cryptocurrency Tether (USDT) and then transferring the money to Cayman Islands-registered Binance wallets based on instructions received from abroad.
However, the exchange said it was yet to receive any notice from the ED.
“WazirX is in compliance with all laws. We go beyond our legal obligations by following Know Your Customer and anti-money laundering processes and have always provided information to law enforcement authorities whenever required,” it tweeted after the ED statement.
“We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in investigation. Your funds are absolutely safe on WazirX,” the exchange added.
WazirX allegedly allowed a wide range of transactions in cryptocurrencies including exchanging cryptos for rupees and the other way round. Apart from these, there are person-to-person transactions and even transfers/receipts of cryptocurrencies held in its pool accounts to wallets of other exchanges, which could be held by foreigners in locations outside India.
The exchange received cryptocurrencies worth Rs 880 crore via its pool account from Binance accounts and transferred cryptocurrencies worth Rs 1,400 crore to Binance accounts during the period under investigation.
The agency said the exchange not collecting requisite documents was a violation of anti-money laundering laws and FEMA guidelines.
The ED said none of these transactions was available on blockchain for any audit/investigation. It was found that WazirX clients could transfer “valuable” cryptocurrencies to any person, irrespective of location and nationality and without proper documentation, and facilitate those users looking to launder money.
WazirX is an India-based cryptocurrency exchange that allows its customers to trade in digital currencies such as Bitcoin, Ethereum, and Ripple.
WazirX claims to have 2 million users on its platform.
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