On Friday, the Enforcement Directorate (ED) announced that it had frozen bank transfers worth Rs 64.67 crore as part of a money laundering investigation against cryptocurrency exchange WazirX . For a while, the crypto exchange has been under scrutiny. The Indian financial crime-fighting agency went after Binance‘s WazirX as part of its investigation into a possible violation of foreign currency rules.
In two instances, the Indian Ministry of Finance confirmed that crypto exchange WazirX was being investigated for money laundering and breaching forex regulations. The exchange, which operates as an independent subsidiary of Binance, is said to have violated the Foreign Exchange Management Act, 1999 (FEMA) provisions. The Directorate of Enforcement is investigating claims that $350 million in cryptocurrency was laundered through WazirX. In 2021, the ED investigated a money laundering case involving Chinese-owned illegal online betting applications.
During the investigation, ED discovered that criminal proceeds worth about 570 million rupees had been converted into crypto on the Binance platform. In one of the cases, WazirX is accused of using Binance’s walled infrastructure to conduct unrecorded transactions on the blockchains and thus cloaked in secrecy. Most of the money was traced to have been transferred to WazirX, and the crypto assets acquired there were subsequently delivered to unknown foreign wallets.
WazirX co-founders Nishal Shetty and Siddharth Menon relocated to Dubai with their families in April 2018 because of India’s new crypto taxation policy. Before that, the executives had distanced themselves from the platform’s day-to-day operations. It was reported that India’s WazirX was among the numerous domestic exchanges being investigated for non-compliance with foreign exchange regulations and money laundering standards.
WazirX is one of India’s biggest cryptocurrency exchanges, with over 70 workers in various cities. The ED agency said it took this action as part of an investigation into the crypto exchange’s suspected role in helping instant loan app companies launder crime proceeds by converting them into cryptocurrencies on its platform. The searches were conducted on one of Zanmai Lab’s directors, who runs WazirX.
According to the ED, many of these fintech businesses dealing in fraudulent lending were backed by Chinese investors. Several fintech firms backed by Chinese investors have been unable to obtain an RBI NBFC license for providing loans. As a result, they came up with the MoU method of piggybacking on other people’s licenses.
Following the start of the criminal probe, several of these fintech applications have closed shop and redirected their considerable earnings away. During a fund trail investigation, ED discovered that a significant amount of money was stolen from the bank as crypto assets and laundered abroad. These companies, as well as the virtual assets, are now untraceable.
The Indian government is imposing new taxes on virtual currencies in an attempt to regulate the trading volume. This move has caused a heavy blow to the virtual currency market, significantly decreasing trading volume. The government took things to an entirely new level in July when it imposed a 30% income tax and a 1% Tax Deducted at Source (TDS) rate on crypto. Trading volumes on exchanges dropped significantly, with WazirX reporting a year-on-year drop of 74 percent as of June 30.