The Enforcement Directorate (ED) issued a show cause notice to the country’s largest cryptocurrency exchange, WazirX for allegedly violating the Foreign Exchange Management Act (FEMA) by conducting transactions worth over Rs 2,790 crore .
WazirX, based in Mumbai, is a crypto currency and bitcoin exchange start-up established under the business name Zanmai Labs Pvt Ltd, which was founded in December 2017.
The exchange (WazirX), the corporation, and directors Nischal Shetty and Sameer Hanuman Mhatre are named in the notice issued by the central investigation agency under various provisions of the FEMA.
The exchange and its organisers have denied any wrongdoing and have said that they are following all the required laws.
The ED stated in a statement that the exchange’s transactions were discovered during an ongoing money laundering investigation targeting Chinese-owned unlawful online betting apps. The ED also stated that the show cause notice is for transactions amounting Rs 2,790.74 crore.
The ED detailed its inquiry in its report :
“It was seen that the accused Chinese nationals had laundered proceeds of crime worth about Rs 57 crore by converting Indian Rupee (INR) deposits into cryptocurrency tether (USDT) and then transferred it to Binance (exchange registered in Cayman Islands) Wallets based on instructions received from abroad.” Binance is regarded as the global leader in this space, having bought WazirX in 2019.
“WazirX allows a wide range of transactions with crypto currencies (CC), including their exchange 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,” the ED reported.
It said that WazirX does not gather the necessary documents, which is an obvious breach of the fundamental obligatory anti-money laundering (AML) and combating financing of terrorism (CFT) rules, as well as FEMA instructions.
During the inquiry period, WazirX customers got inbound bitcoin worth Rs 880 crore from Binance accounts and moved out bitcoin worth Rs 1,400 crore to Binance accounts via its pool account. None of these transactions are public on the blockchain for audit or inquiry, says ED.
According to the agency, WazirX clients may send valuable crypto currency to any person, regardless of location or nationality, without any proper documents, giving it a safe haven for individuals searching for money laundering and other illegal activities.
According to official sources, the show cause notice was given to the corporation following an inquiry into these suspected infractions and as said to be in breach of the FEMA.
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Hello, my name is Anuj Boruah. I am quite interested in writing about current events in business, finance, and the economy. I work as a newswriter at Reviewminute.