The Enforcement Directorate (ED) on Friday said that it has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA (Foreign Exchange Management Act), 1999 for transactions involving cryptocurrencies worth ₹2,790.74 crore.
ED initiated FEMA investigation on the basis of the ongoing money laundering investigation into Chinese owned illegal online betting Applications, it said in a statement.
WazirX, registered under the company named Zanmai Labs Pvt Ltd, was incorporated in December, 2017 as a domestic cryptocurrency startup and its directors Nischal Shetty and Hanuman Mhatre, along with the company, have been named in the notice issued by the central probe agency after completion of investigation. Global cryptocurrency exchange Binance had acquired India’s WazirX in 2019.
Responding to the ED’s notice, Nischal Shetty, Founder & CEO of WazirX said, ”WazirX is yet to receive any show cause notice from the Enforcement Directorate as mentioned in today’s media reports. WazirX is in compliance with all applicable laws.”
”We go beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required,” Shetty said. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in the investigation, he added.
”During the course of the investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime worth ₹57 Crore approximately by converting the INR deposits into Crypto-currency Tether (USDT) and then transferring the same to Binance (exchange registered in Cayman Islands) Wallets based on instructions received from abroad,” ED said in the statement.
ED alleged that WazirX allows vide range of transactions with Crypto-currencies(CCs) including exchange of CCs with INR and vice-versa; exchange of CCs; Person to Person (P2P) transactions; and even transfer/receipt of Crypto-currency held in its pool accounts to wallets of other exchanges which could be held by foreigners in foreign locations.
WazirX, it alleged, does not collect the requisite documents in clear violation of the basic mandatory anti-money Laundering (AML) and combating financing of terrorism (CFT) norms and also FEMA guidelines.
“In the period under investigation, users of WazirX via its pool account, have received incoming cryptocurrency worth ₹880 crore from Binance accounts and transferred out cryptocurrency worth ₹1,400 crore to Binance accounts. None of these transactions are available on the blockchain for any audit or investigation,” it claimed.
It was found that the WazirX Clients could transfer ‘valuable’ crypto-currencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/ other illegitimate activities, the agency added.
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