The Enforcement Directorate of India (ED) has launched a back-to-back investigation into several digital asset exchange platforms. Vauld, a Singaporean crypto exchange, recently came under the scrutiny of the anti-money laundering agency. The embattled Asian crypto lender Vauld, in a news release on Saturday, “respectfully disagrees” with the recent freezing of some of its assets by Indian authorities.
India’s ED goes after Vauld and freezes assets
On Thursday, it was reported that the Indian Enforcement Directorate (ED) froze bank assets worth Rs 370 billion (about $48 million). These assets belonged to the troubled exchange, Vauld.
The news comes a week after the account of one of Zanmai Lab’s directors at WazirX, one of India’s cryptocurrency exchanges, was frozen. This development also comes as the Indian agency investigates at least 10 crypto exchanges for alleged money laundering of over $125 million.
On Friday, India’s Enforcement Directorate (ED) announced that it had frozen the financial accounts of Bangalore-based money services firm Yellow Tune Technologies. Flipvolt, a Singaporean Vauld Indian affiliate, was one of the assets in question.
The move is connected to an ongoing investigation into Chinese money-laundering operations linked to instant loans. This is the second time this week that the ED has acted in the crypto industry as a result of that case.
According to the press release, Vauld’s local entity was used by 23 predatory fintech and non-banking businesses to deposit millions of dollars into wallets under Yellow Tune Technologies’ control. In another instance, WazirX is accused of assisting 16 suspected fintech businesses in laundering illicit loan applications.
The financial regulator announced that it was restricting Yellow Tune’s bank accounts and payment gateway balances for a total of 3.7 billion rupees, or $46.4 million, in response to reports that the firm was a “shell entity” established by two Chinese individuals using aliases. According to reports, the ED spent three days investigating Yellow Tunes’ suspected locations.
The ED’s report said that Vauld’s Indian entity had extremely lax know-your-customer (KYC) standards. It also lacks a more thorough due diligence process, no check on depositors’ funding sources, and no method for reporting Suspicious Transaction Reports (STRs), among other things.
Lax KYC [Know Your Customer] norms, loose regulatory control of allowing transfers to foreign wallets without asking any reason/declaration/KYC, non-recording of transactions on Blockchains to save costs etc, has ensured that Flipvolt is not able to give any account for the missing crypto assets. It has made no sincere efforts to trace these crypto assets.
Enforcement Directorate
Vauld fights the money laundering allegations
Vauld said that the crypto lender had handed over and followed the ED summons to supply documents to investigators. It went on to say that the freeze resulted from an account belonging to a former customer of the platform, which had since been closed.
Based on the above, Vauld said that the company had done nothing wrong, and the entity was perplexed as to why it was handed such a heavy penalty.
We are seeking legal advice on our best course of action in order to protect the interests of the company, its customers, and all the stakeholders. We have fully cooperated with the Enforcement Directorate and will continue to extend our cooperation to ensure we continue to remain a safe place for customers to transact and own cryptocurrencies.
Vauld
Meanwhile, despite collaboration, the cryptocurrency exchange expressed displeasure at the government’s decision to freeze funds.
Meanwhile, the ED’s report alleges that the company’s promoters are unidentifiable. Some Chinese people were discovered to have established shell companies. However, new bank accounts were also being opened in fake directors’ names. These suspects departed India in December 2020.
According to a post on the blog, Vauld is seeking legal advice to pursue its best course of action to safeguard consumers and the firm. It is said that the exchange strictly follows KYC standards worldwide. It also claimed that they fully complied with the ED and will continue to do so.
Vauld remains in trouble
Notably, in July, the Singapore-based Vauld halted deposits, trading, and withdrawals on its platforms after announcing layoffs during a market downturn. The accused fintech firms are now accused of using the platform to avoid regular bank channels and transact all the fraudulent money in the form of crypto assets.
The platform is now being tested as a prominent participant in money laundering by encouraging obscurity and having lax AML standards. Vauld is one of many crypto lenders grappling with liquidity difficulties. The Singapore High Court has given Vauld a three-month moratorium while it considers options to solve its economic difficulties.
