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ED issues notice to cryptocurrency exchange WazirX over 2,790-cr transactions

The Enforcement Directorate (ED) has issued a show-cause notice to leading Indian cryptocurrency exchange Zanmai Labs Pvt Ltd (WazirX) and its directors Nischal Shetty and Sameer Hanuman Mhatre under the Foreign Exchange Management Act (FEMA), 1999, for transactions involving cryptocurrencies worth 2790
By Vijay Kumar Yadav
PUBLISHED ON JUN 11, 2021 11:58 PM IST

The Enforcement Directorate (ED) has issued a show-cause notice to leading Indian cryptocurrency exchange Zanmai Labs Pvt Ltd (WazirX) and its directors Nischal Shetty and Sameer Hanuman Mhatre under the Foreign Exchange Management Act (FEMA), 1999, for transactions involving cryptocurrencies worth 2790.74 crore.

Shetty, who is the CEO and founder of WazirX, said they are yet to receive a notice from ED.

“WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following Know Your Customer (KYC) and anti-money laundering (AML) processes and have always provided information to law enforcement authorities whenever required. We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from ED, we’ll fully cooperate in the investigation,” Shetty stated.

On Friday, an ED statement read that the agency has initiated a FEMA investigation on the basis of the ongoing money laundering investigation into illegal Chinese betting applications.

During the course of the investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime worth around 57 crore by converting the deposited Indian currencies into cryptocurrency tether (USDT) and then transferring it to Binance Wallets (an exchange registered in Cayman Islands) based on instructions received from abroad, said ED.

WazirX allows a wide range of transactions, including exchange of cryptocurrencies with Indian rupee (INR) and vice-versa and cryptocurrencies to P2P (person-to-person) exchange as well as transfer of cryptocurrency held in its pool accounts to wallets of other exchanges which could be received at foreign locations.

“WazirX does not collect the requisite documents, which is in clear violation of the basic mandatory AML and combating of financing of terrorism (CFT) precaution norms and FEMA guidelines,” ED stated.

In the period under investigation, the users of WazirX via its pool account have received incoming cryptocurrency worth 880 crore and transferred cryptocurrency worth 1,400 crore to Binance accounts. None of these transactions are available on blockchain for any audit/investigation, read the ED statement.

The anti-money laundering agency added that it was found that WazirX’s clients could transfer valuable cryptocurrencies to any person irrespective of location and nationality without any proper documentation, making it a safe haven for users looking for money laundering and other illegitimate activities.

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