Anti-Money Laundering Investigation: Indian authorities block $ 8.1 million of the WazirX exchange

India’s Directorate of Enforcement, or ED, announced that it has frozen approximately $ 8.1 million in funds following an investigation linked to the crypto exchange WazirX as part of an instant personal loan fraud.

In a shared announcement Friday, the Directorate of Enforcement reported that WazirX would facilitated the transactions of anonymous fintech companies “to purchase crypto assets in order to launder them overseas” as part of a scheme involving China-backed companies circumventing Indian regulations. In its investigation, the ED said it ordered the freezing of WazirX’s bank accounts, containing 646.7 million Indian rupees – about $ 8.1 million at the time of writing – and extended the investigation to the co – founder Sameer Mhatre.

According to the regulator, the investigation is still ongoing. The ED said the crypto exchange had “lax KYC regulations” and “weak regulatory scrutiny” of transactions between WazirX and Binance. not recording the necessary information to verify the origin of the funds used to purchase cryptocurrencies in the alleged fraud.

“Despite repeated opportunities, WazirX did not provide the cryptocurrency transactions of the suspicious APP fintech companies and did not disclose the KYC of the wallets.”the ED said, adding:

“WazirX is unable to provide any reporting on missing cryptocurrency assets. It has made no effort to trace these crypto assets. Encouraging anonymity through lax anti-money laundering procedures, it has actively assisted some 16 fintech companies accused of laundering proceeds of crimes using cryptocurrencies “.

ED searches Crypto Exchange director WazirX and freezes his bank assets worth Rs64.67 million for assisting instant loan APP companies accused of fraudulent money laundering through the purchase and transfer of virtual assets in cryptocurrency.

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 laundering of fraud money via purchase & transfer of virtual crypto assets.

— ED (@dir_ed) August 5, 2022

Yesterday, on a Twitter thread, Binance CEO Changpeng Zhao has declared that the company “does not own any stake in Zanmai Labs, the entity that manages WazirX founded by the original founders”. He added that “Binance only provides wallet services for WazirX as a technology solution”while WazirX is responsible for the KYC and other operations on the exchange.

The director of WazirX, Nischal Shetty, has disputed many of CZ’s claims, stating on Twitter that the crypto exchange has “been acquired by Binance Zanmai Labs” and that it is “an Indian entity owned by me and my co-founders”. He stated that Binance is responsible for managing the cryptocurrency exchange pairs and processing withdrawals.

With the exodus of many cryptocurrency companies from China following the regulatory crackdown, many companies have turned to Indian markets. The ED reported that some fintech companies “backed by Chinese funds” have “leaned” on Indian companies with licenses of defunct non-bank finance companies to offer lending services to residents.

As of June 2021 the ED already had taken similar action against the exchange, ordering cases related to money laundering transactions involving illegal online betting applications involving Chinese citizens to be filed. At the time, Shetty he stated that the exchange was gone “beyond its legal obligations, following the Know Your Customer (KYC) and Anti Money Laundering (AML) processes, always providing the information to the police authorities”.

Cointelegraph has contacted WazirX but has received no response at the time of writing.