WazirX, one of the largest crypto exchanges in India, has been issued a notice by the Enforcement Directorate (ED) of India for conducting transactions that are in violation of the Foreign Exchange Management Act (FEMA).
Crypto exchanges have been under scrutiny by the Indian government and the regulatory authorities for long as they have been suspected of money laundering and other sorts of financial crime. Though the exchanges have tried their best to keep their books clean and also be transparent with their processes and transactions, the authorities and the banks have still not been able to reconcile with their operations. This new action against WazirX is seen as one more act in this regard.
The exchange and its directors Nischal Shetty and Sameer Hanuman Mhatre have been issued notices by ED for violating foreign exchange laws to the tune of Rs. 2,790 crores (around $300 million).
“The agency has found evidence of non-compliance with forex rules and how users are using the crypto platform to launder money. Similar action is expected against more crypto platforms and their executives this month,” said a senior official in the agency.
“Some Chinese nationals have laundered Rs 57 crore by converting rupees into cryptocurrency Tether (USDT) and then transferring the money to Cayman Islands-registered Binance wallets based on instructions received from abroad,” according to the ED.
The exchange has been accused of converting a large amount of rupees into cryptocurrencies and vice versa. It is also alleged to have used its central wallet to make transactions involving a huge amount of funds to wallets outside India and vice versa as well. For example, the exchange is alleged to have sent around $100 million worth of cryptos to Binance wallet (Binance is a shareholder in WazirX) and received around $175 million back into its wallet from Binance. But the company has said that it had not received any notice so far.
“WazirX is in compliance with all laws. We go beyond our legal obligations by following Know Your Customer and anti-money laundering processes and have always provided information to law enforcement authorities whenever required,” it tweeted after the ED statement.
“We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in the investigation. Your funds are absolutely safe on WazirX,” the exchange added.
The troubled times for crypto exchanges in India seem to be never-ending and in this latest twist, the users of the exchange are likely to be the ones most affected as the tussle between the regulators and the exchanges continues.