ED issues notice to WazirX and its directors for crypto transactions worth Rs 2790 crore

The Enforcement Directorate (ED), on June 11, issued a show-cause notice to cryptocurrency exchange WazirX and its directors Nischal Shetty and Sameer Mhatre under the Foreign Exchange Management Act (FEMA) 1999, for transactions involving cryptocurrencies worth Rs 2,790.74 crore.

ED initiated the FEMA investigation on the basis of an ongoing money laundering probe into Chinese-owned “illegal” online betting applications, the agency said in a statement.

WazirX is an Indian crypto exchange that acts as a platform for trading various digital currencies.

The law enforcement agency said that accused Chinese nationals had laundered proceeds of crimes worth approximately Rs 57 crore by converting the Indian Rupee deposits into cryptocurrency Tether and then transferred them to Binance Wallet, an exchange registered in the Cayman Islands, based on “instructions received from abroad”.

ED said that in the period under investigation, users of WazirX via its pool account, received incoming cryptocurrency worth Rs 880 crore from Binance accounts and transferred out digital currencies worth Rs 1,400 crore to Binance accounts. “None of these transactions are available on the blockchain for any audit/investigation,” ED said. The platform allows transactions with cryptocurrencies including exchange of digital currencies with the Indian Rupee and vice-versa; exchange of cryptocurrencies; person-to-person transactions and transfer or receipt of cryptocurrencies held in its pool accounts to wallets of other exchanges, which, the ED claimed, could be held by foreigners overseas.

“WazirX does not collect requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines,” the agency said in a statement.

“It was found that the WazirX clients could transfer ‘valuable’ cryptocurrencies 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,” ED added.

In its May 31 clarification, the Reserve Bank of India (RBI) had specifically highlighted certain provisions of law while asking banks to exercise caution.

The RBI had asked banks to carry out the necessary customer due diligence process in line with regulations governing standards for Know Your Customer (KYC), AML, CFT and obligations of regulated entities under Prevention of Money Laundering Act, (PMLA), 2002. S- Money Control

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