Cryptocurrency Exchange WazirX Accused of Laundering Money of Chinese Betting Apps By ED

WazirX and other crypto exchanges in India have been facing trouble with regulators for a while now, amid other concerns.

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India’s Enforcement Directorate has issued a Show Cause notice to the largest cryptocurrency exchange in the country, WazirX. “ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore,” the authority said in a tweet. The notice has been issued to Nischal Shetty and Sameer Hanuman Mhatre, the two directors of WazirX, under the Foreign Exchange Management Act (FEMA) of 1999. The allegations against the firm are quite serious and mark a new step in the tussle between the Indian government and crypto companies.

“ED initiated FEMA investigation on the basis of the ongoing money laundering 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,” the authority said in a press release.

The ED also alleged that WazirX does not collect the requisite documents required for the kind of transactions it allows. It said this is a “clear violation” of the anti money laundering (AML) and combating of financing of terrorism (CFT) precautions in the FEMA guidelines. “In the period under investigation, users of WazirX via its pool account have received incoming cryptocurrency worth INR 880 crore from Binance accounts and transferred our cryptocurrency worth INR 1400 crore to Binance accounts,” the ED said. “None of these transactions are available on the blockchain for any audit/investigation. It was found that the 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,” it added.

The ED’s move comes less than two days after police in China arrested over 1100 individuals on charges of money laundering through cryptocurrencies. China has also been cracking down on crypto mining operations and exchanges since the last month.

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