Blow To WazirX Over Crypto Transactions, ED Issues Notice

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Directorate of Enforcement (ED) has issued a Showcause Notice (SCN) to Crypto-Currency Exchange firm Zanmai Labs (WazirX), and its Directors Nischal Shetty and Sameer Hanuman Mhatre under Foreign Exchange Management Act, 1999, (FEMA) for transactions involving crypto-currencies worth Rs 2790.74 Crore.

ED initiated FEMA or foreign exchange linked investigations on the basis of the ongoing investigation into Chinese owned illegal online betting applications. During the course of the investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime worth Rs 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.

Most crypto exchanges in India have a broad ratio of women investors in the range of 15-20% and these are across urban centres like Maharashtra, Tamil Nadu, Karnataka and Delhi. WazirX has previously reported a big chunk of female investors joining in the last few months when Bitcoin was on an uptick surge. The ED blow will hit sentiment across all investors.

The ED Showcause notice  has alleged that WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines. In the period under investigation, users of WazirX via its pool account, have received incoming Crypto-Currency worth Rs 880 Crore from Binance accounts and transferred out Crypto-Currency worth Rs 1400 crore to Binance accounts.

Responding to the ED’s notice, as per this report, 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.”

None of these transactions are available on the blockchain for any audit/investigation. The ED release said that 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.

Image Credit: Reuters