The Directorate of Enforcement in India has announced it froze around $8.1 million worth of funds belonging to the WazirX cryptocurrency exchange. The ED added that they had also conducted a search linked to WazirX as it investigated the instant personal loan fraud.
Authorities freeze $8.1M of WazirX funds
The Directorate of Enforcement released an announcement Friday saying that the exchange gad facilitated transactions through unnamed fintech companies. These companies used the exchange to buy digital assets and then launder them worldwide. Authorities said that the scheme involved Chinese-affiliated companies avoiding the licensing requirements in India.
The investigations by the ED said that it had ordered the bank accounts of the exchange to be frozen. The frozen accounts contain 646.7 million Indian rupees, equivalent to around $8.1 million. Authorities are also investigating the co-founder of the exchange, Sameer Mhatre.
The regulator said that the investigations on the matter were still ongoing. However, it added that the exchange had implemented weak know-you-customer (KYC) requirements, and the regulatory frameworks facilitating transactions between WazirX and Binance were weak.
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According to the regulatory authority, the exchange failed to record the information needed to verify the origin of funds flowing into the exchange. The exchange also could not adhere to the regulatory requirements concerning the source of funds and reveal the KYC of the involved digital asset wallets.
It further claimed that WazirX did not provide any account of the missing cryptocurrencies. The company also failed to trace the crypto assets. By enabling transaction anonymity and failing to adopt robust anti-money laundering (AML) laws, WazirX has helped around 16 fintech firms in money laundering using cryptocurrencies.
Binance denies involvement
The CEO of Binance, Changpeng Zhao, has said that the company does not own any equity in Zanmai Labs, the parent company behind the exchange. Zhao added that Binance only offered wallet services to WazirX, and the Indian-based exchange was solely responsible for KYC and other operations.
The director of WazirX, Nischal Shetty, has disputed the claims made by Zhao saying that Binance acquired the exchange. Shetty added that Binance was responsible for processing withdrawals and operating crypto trading pairs.
The ban on crypto activities in China has led to China-based crypto firms moving to India. The authorities said that some fintech firms supported by Chinese funds were offering digital asset lending services to residents despite failing to uphold non-banking financial company licensing.