A major Indian cryptocurrency exchange, Wazirx, has seen its bank assets of over $8 million frozen by the Enforcement Directorate (ED). The exchange was allegedly acquired by Binance in 2019. However, Binance CEO Changpeng Zhao (CZ) now claims that the acquisition was “never completed.” Wazirx, however, maintains that it was acquired by Binance.
ED action against Wazirx
India’s Enforcement Directorate (ED) issued a press release on Friday about Wazirx, a major cryptocurrency exchange in India. ED is a law enforcement and economic intelligence agency of the Government of India. The ad details:
The Enforcement Directorate (ED) has searched one of the directors of M/s Zanmai Lab Pvt Ltd, which owns the popular cryptocurrency exchange Wazirx and has issued a freezing order to freeze his bank balances to the tune of INR 64, 67 million rupees.
ED stated that this action is part of its money laundering investigation against non-bank financial companies (NBFCs) and their fintech partners for “predatory lending practices in violation of RBI”. [Reserve Bank of India] guidelines.”
The announcement describes: “ED discovered that fintech companies siphoned off a large amount of funds to buy crypto assets and then launder them abroad. These companies and virtual assets are untraceable at this time.”
ED alleged that Zanmai Labs created a network of deals with Crowdfire Inc. (US), Binance (Cayman Islands), and Zettai Pte Ltd. (Singapore) “to hide ownership of Wazirx.” The authority further claimed that Wazirx gave “contradictory” and “ambiguous” answers “in order to evade the supervision of Indian regulatory agencies,” noting that the exchange did not provide crypto transactions from suspicious fintech companies.
“Due to the uncooperative position of the director of the Wazirx exchange, a search operation was carried out,” ED emphasized. “Mr. Sameer Mhatre, director of Wazirx, was found to have full remote access to the Wazirx database, but despite that, he does not provide transaction details related to crypto assets, acquired with the proceeds of crime. of Instant Loan APP Fraud.” The law enforcement agency further alleged:
Lax KYC rules, lax regulatory control of transactions between Wazirx and Binance, lack of transaction logging on blockchains to save costs, and lack of KYC registration of opposing wallets have ensured that Wazirx cannot give any accounts for the lack crypto assets. It has made no effort to track these crypto assets.
“By fostering obscurity and having lax AML regulations, it has actively helped around 16 accused fintech companies to launder proceeds of crime using the crypto route. Therefore, the equivalent movable property to the extent of Rs. 64.67 crore [$8.14 million] lying with Wazirx were frozen,” ED’s announcement concludes.
Binance Statements on Wazirx Acquisition
Having seen media reports about his exchange mentioned in relation to Wazirx, Binance CEO Changpeng Zhao (CZ) fixed on Twitter that his company “does not own shares in Zanmai Labs.”
On November 21, 2019, Binance published a blog post saying that it had “acquired” Wazirx. This transaction was never completed. Binance has never, at any time, owned shares in Zanmai Labs, the entity that operates Wazirx.
“Binance only provides wallet services for Wazirx as a technology solution. There is also integration using off-chain tx, to save on network fees. Wazirx is responsible for all other aspects of the Wazirx exchange, including user registration, KYC, trading, and initiation of withdrawals,” explained CZ.
“The recent allegations regarding the operation of Wazirx and how Zanmai Labs manages the platform are of great concern to Binance. Binance collaborates with law enforcement agencies around the world. We would be happy to work with ED in any way possible,” the Binance chief emphasized.
CZ’s clarification surprised many in the Indian crypto community, as they were under the impression that Wazirx is a Binance company.
Clarification from the founder of Wazirx, Warning from Binance
In an attempt to clarify the relationship between Wazirx and Binance, Wazirx founder Nischal Shetty insisted on Twitter that his exchange was acquired by Binance.
He added that Zanmai Labs, an entity he co-owns, obtained a license from Binance to operate INR cryptocurrency trading pairs on Wazirx, while Binance operates crypto-to-crypto pairs and processes cryptocurrency withdrawals.
Asking investors not to confuse Zanmai Labs and Wazirx, he revealed that Binance owns the Wazirx domain name, has root access to its AWS servers, owns all crypto assets, and receives all crypto profits.
Responding to Shetty’s tweets, CZ confirmed:: “We could close Wazirx. But we can’t because it hurts users.” He added that Binance has no operational control, including “user registration, KYC, trading, and initiation of withdrawals,” noting that they are controlled by the founding team of Wazirx. The Binance CEO emphasized: “This was never transferred, despite our requests. The deal never closed. No stock transfers.
If you have funds on Wazirx, you need to transfer them to Binance. Simple as that. We could technologically disable Wazirx wallets, but we cannot/will not. And no matter how many debates we are enduring, we cannot/will not hurt users.
What do you think about the situation in which the Indian crypto exchange Wazirx finds itself? Let us know in the comments section.
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