BackED conducts searches at WazirX owner Zanmai Lab
The anti-money laundering agency said it seized the exchange’s assets ‘for assisting accused instant loan app companies in the laundering of fraud money via purchase and transfer of virtual crypto assets’
PremiumThe Enforcement Directorate on Friday conducted searches on one of the directors of Zanmai Lab Pvt. Ltd, which operates cryptocurrency exchange WazirX, and froze the exchange’s bank balances worth ₹64.67 crore.
In the statement on Twitter, the anti-money laundering agency said it seized the exchange’s assets “for assisting accused instant loan app companies in the laundering of fraud money via purchase and transfer of virtual crypto assets".
On Wednesday, Pankaj Chaudhary, minister of state for finance, told lawmakers in the Rajya Sabha that the probe agency issued a notice to WazirX under the Foreign Exchange Management Act.
ED is probing several non-banking financial companies (NBFCs) and their fintech partners for engaging in predatory lending practices in violation of Reserve Bank of India’s guidelines and using telemarketers who use callers’ personal information and foul language to extract usurious interest rates.
Numerous fintech firms that have failed to obtain NBFC licences from RBI have used defunct NBFCs to lend money, the ED statement said. Many of these fintech firms are supported by Chinese investors,
ED alleged that Zanmai Lab entered into a web of agreements with Crowdfire Inc. in the US, Binance (Cayman Islands), and Zettai Pte Ltd in Singapore to conceal its ownership of the cryptocurrency exchange.
Nischal Shetty, the company’s managing director, had claimed that WazirX is an Indian exchange that manages all crypto-crypto and INR-crypto trading and only has intellectual property and preferential agreements with Binance. However, according to ED, Zanmai currently asserts that they only participate in INR-crypto transactions and Binance handles all other transactions on WazirX. To avoid regulation by regulatory agencies, they are providing conflicting and unclear responses, the agency said.
“Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech app companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also," it said.
Moreover, WazirX said that before July 2020, they did not record the bank account details from which funds were coming into the exchange to purchase crypto assets. No physical address verification was done, and neither was there any check on the source of funds of their clients, ED said.
"We have been fully cooperating with the Enforcement Directorate(ED) for several days and have responded to all their queries fully and transparently. We do not agree with the allegations in the ED press release. We are evaluating our further plan of action." a company spokesperson said in a statement late Friday.
In a Twitter post, Changpeng Zhao, CEO of Binance, said the company does not own equity in Zanmai Labs, the entity operating WazirX.
Furthermore, clarifying on the matter, Nischal Shetty, founder and chief executive officer of WazirX took to twitter saying "WazirX was acquired by Binance and that Zanmai Labs is an Indian entity owned by me and my co-founders. Zanmai Labs has license from Binance to operate INR-Crypto pairs in WazirX. Binance operates crypto to cryto pairs, process crypto withdrawal...
Adding that one can check the above fact by going to TOS of WazirX. He even informed more facts about WazirX stating that Binance owns WazirX domain name. Binance has root access of AWS servers. While Binance also has all the crypto assets and all the crypto profits. Don't confuse Zanmai and WazirX, Shetty said.
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