The Enforcement Directorate (ED) released a statement onTwitter that a show cause notice to an Indian cryptocurrency exchange WazirXhas been issued.
The cause is contravention of FEMA (Foreign ExchangeManagement Act), 1999.
The issue involves cryptocurrencies worth Rs 2,790.74 crore.
The department is conducting an ongoing investigationregarding money laundering into the Chinese-owned illegal online bettingapplication, claimed ED in a statement.
WazirX was incorporated in India in December 2017 under acompany named Zanmai Labs Private Limited as a domestic cryptocurrency startup.
The company, including its directors Nischal Shetty andHanuman Mhatre have been included in the notice. Further, global cryptocurrencyexchange Binance had acquired WazirX in 2019.
Nischal Shetty, Founder and CEO of WazirX claimed on Twitterthat his company is yet to receive any show cause notice and also mentionedthat his company is in compliance with all applicable laws.
He continued that they go beyond the legal obligations byfollowing KYC (Know Your Customer) and AML (Anti Money Laundering) processes. Hefurther mentioned that their company has always provided information to lawenforcement agencies whenever required.
However, ED claimed that the company does not collectthe requisite documents. Not collecting this documentation is a clear violationof AML, combating financing of terrorism (CFT) and FEMA.
“During the course of the investigation, it was seen thatthe accused Chinese nationals had laundered proceeds of crime worth ₹57 Croreapproximately by converting the INR deposits into Crypto-currency Tether (USDT)and then transferring the same to Binance (exchange registered in CaymanIslands) Wallets based on instructions received from abroad,” ED said in thestatement.
Specifically, a wide range of transactions with cryptocurrencieswhich could be held by foreigners in foreign locations is something which theED is not okay with.
"In the period under investigation, users of WazirX viaits pool account, have received incoming cryptocurrency worth ₹880 crore from Binanceaccounts and transferred out cryptocurrency worth ₹1,400 crore to Binanceaccounts. None of these transactions are available on the blockchain for anyaudit or investigation," it claimed.
ED claimed that WazirX Clients could transfer ‘valuable’cryptocurrencies without requiring any documentation to anyone in any part ofthe world without any regard to nationality. This made it a safe haven forusers looking for money laundering and other illegitimate activites.
Also read: Real-Estate sector experience burn of Covid 2nd wave, homebuyers delay purchase decisions