Indian law enforcement accuses WazirX exchange of aiding in laundering of $130M

India’s Enforcement Directorate, which investigates financial crime, has frozen WazirX bank accounts while it looks at transfers from instant loan companies to international wallets.

India’s Enforcement Directorate (ED), the agency responsible for financial crimes, is looking at cryptocurrency exchanges suspected of processing transactions that sent more than 10 billion rupees, or about $130 million, from firms under investigation to international wallets. At least ten crypto exchanges are allegedly involved, according to an official who spoke to The Economic Times, and bank accounts of exchange WazirX have been frozen, the newspaper reported.

Transactions of up to 1 billion rupees, or $1.3 million, were allegedly made in the names of people with no connections to the money by companies investigation in a case involving instant loans. The companies in the case often had ties to China. Even though Know Your Customer/Anti-Money Laundering (KYC/AML) procedures showed the transactions to be suspicious, no enhanced due diligence was performed and no suspicious transaction reports were filed to the ED, the agency claimed.

The ED froze WazirX bank accounts containing about 647 million rupees or $8.1 million, last week, alleging that the exchange had assisted about 16 fintech companies under investigation for money laundering. WazirX released a statement on its blog Tuesday “on behalf of Zanmai Labs Pvt. Ltd,” which, it said, co-operates WazirX along with Binance, saying that all users are subject to KYC/AML processes and the exchange cooperates fully with law enforcement. “For every transaction, we are able to produce the KYC details of the relevant user,” the blog post said.

The accusations against WazirX have drawn attention to its opaque ownership structure and the role Binance plays in it. Binance CEO Changpeng Zhao (CZ) tweeted Aug. 5 that his company did not complete the acquisition of WazirX announced in 2019. The next day, in an exchange with WazirX cofounder Nischal Shetty, CZ stated, “we asked for transferring of WazirX system source code, deployment, operations, as recently as Feb this year. This was refused by WazirX. Binance do NOT have control on their systems.”

1/ Deal involved Binance Parent entity

After some media reports on Binance structure, we asked about it

We were given an ambiguous answer that parent entity is under restructuring

It’s been many months, still waiting for Binance Parent entity

Can Binance name Parent entity? https://t.co/5oehKqaTxp

— Nischal (Shardeum) ⚡️ (@NischalShetty) August 6, 2022

This investigation was not the first time WazirX has been accused of inadequate AML measures. In 2021, WazirX was implicated by the ED in money laundering of illegal online gambling proceeds, also with a Chinese connection.