WazirX, the largest Cryptocurrency exchange platform in India, is in trouble. Today, the Enforcement Directorate(ED) has sent a show-cause notice to WazirX under Foreign Exchange Management Act(FEMA) 1999. As per ED’s notification, the startup has not followed the necessary rules and regulations in doing Cryptocurrency transactions worth over Rs 2790 crore.
What Irregularities ED Found on Wazir Platform?
ED is a government agency that keeps a close watch on the financial transactions happening in/out of India. It takes appropriate action whenever any irregularities are found in the financial records. In a recent case, the agency found that WazirX has not followed FEMA regulations in Cryptocurrency transactions on its platform. That is why ED has sent a notification to WazirX about the current irregularities.
As per ED notification, in crypto transactions of Rs 2790 crore, WazirX did not follow the national as well as international financial rules. Due to that, WazirX has promoted money laundry on its online platform.
ED has sent the notice to WazirX company and its top management including Nischal Shetty and Sameer Hanuman Mhatre, Indian Officials said on Friday.
The notice has been sent to the company and its directors Nischal Shetty and Sameer Hanuman Mhatre.
ED officials have already initiated an investigation under the Foreign Exchange Management Act or FEMA as part of its investigation into Chinese-owned “illegal” online betting applications.
Talking about the latest investigation and the irregularities in WazirX transactions, ED said:
“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 the Cayman Islands) Wallets based on instructions received from abroad.”
WazirX is acquired by Binance, a worldwide popular crypto exchange platform.
In the ongoing investigation, ED also found that WazirX platform transactions are not available on the blockchain for any audit. It is a worrisome situation for the agency.
In further detail about the current financial issues related to WazirX, ED said:
“In the period under investigation, users of WazirX via its pool account, have received incoming Crypto-Currency worth INR 880 Crore from Binance accounts and transferred out Crypto-Currency worth INR 1400 Crore to Binance accounts. None of these transactions is available on the blockchain for any audit/investigation.”
ED found two major issues on the WazirX platform. First, the startup doesn’t ask for KYC or other necessary documents for crypto transactions. Second, the WazirX platform allows anyone to send crypto from one country to another country without following FEMA regulations.
“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.”
WazirX is in a denial mode related to Illegal Transactions
When Nischal Shetty was contacted related to the ED notification, he said that neither firm nor I receive any notification yet.
In discussion with Entrackr, Nischal said:
“WazirX is yet to receive any show-cause notice from the Enforcement Directorate as mentioned in today’s media reports.”
He further clarified that WazirX has not done any illegal transactions and the online platform has strictly followed the rules and regulations stated by ED.
He further added:
“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 the ED, we’ll fully cooperate in the investigation.”
Reserve Bank of India(RBI) was suspicious about the crypto exchange transactions from the beginning. The central body alerted all financial institutions about the strict audit of all transactions happening on crypto exchange platforms.
Right now, WazirX declined any irregularities on its platform. But it is not an official reply to ED. The startup did not receive the ED notification yet. We will update you once WazirX acts on the ED notification officially.