The action by ED comes after a money laundering probe.
Enforcement Directorate conducted searches in relation to a case where a cryptocurrency exchange platform WazirX allegedly helped organisations that provide rapid loan apps by buying and selling virtual crypto assets to launder money.
In a statement issued on Twitter, “ED searches the Director of WazirX Crypto-Currency Exchange & freezes its Bank assets worth Rs 64.67 Crore for assisting accused Instant Loan APP Companies in the laundering of fraud money via purchase & transfer of virtual crypto assets.”
According to a report, ED conducted searches on the Director of Zanmai Labs Pvt. Ltd, which owns WazirX and alleged him to be non-cooperative.
The ED’s investigation into the cryptocurrency exchange is connected to its ongoing inquiry into many Chinese loan apps (mobile applications) operating in India.
Days after serving WazirX with a notification under the FEMA Act, the ED took this move.
ED also stated, “While doing fund trail investigation, ED found that a 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.”
Furthermore, ED said, “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.”
As alleged by ED, “It was found that 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. The lax KYC norms, loose regulatory control of transactions between WazirX and Binance, non-recording of transactions on blockchains to save costs, and non-recording of the KYC of the opposite wallets has ensured that WazirX is not able to give any account for the missing crypto assets.”
Earlier, Nischal Shetty claimed that WazirX controls all crypto-crypto and INR-crypto transactions and only has a preferential agreement with Binance.
However, now Zanmai claims they are involved in only INR-crypto transactions, and all other transactions are taken care of by Binance on WazirX.
Additionally, WazirX stated that before July 2020, the company did not keep track of the bank account information used to send money into the exchange to buy cryptocurrency assets.
No physical address verification is carried out. “The clients’ sources of funding are not checked. No EDD is completed. STRs weren’t triggered, ” ED declared.
Therefore, ED had frozen WazirX’s assets under the Prevention of Money Laundering Act (PMLA).