Published: Published Date – 09:27 PM, Fri – 5 August 22
Hyderabad: The Enforcement Directorate (ED) has frozen movable assets of crypto-currency exchange company WazirX to the extent of Rs. 64.67 crore under Prevention of Money Laundering Act (PMLA)-2002.
It conducted searches on one of the directors of Zanmai Lab Private Limited (ZLPL), which owns WazirX, and has issued an order to freeze their bank balances to the tune of Rs.64.67 crore. The ED is conducting money laundering investigation against a number of Indian Non-Banking Financial Companies (NBFC) and fintech partners for predatory lending practices in violation of the RBI guidelines and by using tele-callers who misuse personal data and use abusive language to extort high interest rates from the loan takers.
In a press release, ED said that various fintech companies backed by Chinese funds could not get NBFC license from RBI for carrying out lending business. So they devised the MoU route with defunct NBFCs to piggyback on their license.
After the beginning of investigation, many of these fintech apps have shut their shop and diverted away huge profits earned using the above modus operandi. While doing fund trail investigation, the ED found out that large amounts of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad.
These companies and the virtual assets are untraceable at the moment. Summons were issued to the crypto-exchanges. It was seen that the maximum amount of funds were diverted to WazirX exchange and the crypto-assets so purchased have been diverted to unknown foreign wallets.
During investigation, it was observed that ZLPL has created a web of agreements with Crowdfire Inc. USA, Binance (Cayman Islands), and ZettaiPte Ltd Singapore to obscure the ownership of the crypto exchange. Earlier, Managing Director of ZLPL Nischal Shetty claimed that WazirX is an Indian exchange which controls all the crypto-crypto and inr-crypto transactions and only has an IP and preferential agreement with Binance.
As of now, ZLPL claims that they were involved in only INR-crypto transactions, and all the other transactions are done by Binance on WazirX. They are giving contradictory and ambiguous answers to evade oversight by Indian regulatory agencies. 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 transactions were not recorded on the blockchain.
Due to the non-cooperative stand of the Director of WazirX exchange, a search operation was conducted under PMLA on August 3 and it was found that Sameer Mhatre, Director WazirX, has complete remote access to its database, but despite that he is not providing the details of the transactions relating to crypto assets, purchased from the proceeds of crime of instant loan app fraud.
The lax KYC norms, loose regulatory control of transactions between WazirX and Binance and non-recording of transactions on blockchains to save costs and non recording of KYC of the opposite wallets has ensured that WazirX is not able to give any account for the missing crypto assets, It made no efforts to trace these crypto assets.
By encouraging obscurity and having lax AML norms, it has actively assisted around 16 accused fintech companies in laundering the proceeds of crime using the crypto route. Therefore, equivalent movable assets to the extent of Rs. 64.67 crore lying with WazirX were frozen, the press release added.