The Directorate of Enforcement (ED) announced on Friday that it had searched one of Zanmai Lab Pvt Ltd’s directors’ residences and had given them an order to freeze their bank accounts, which totalled Rs 64.67 crore. Zanmai Lab Pvt Ltd owns the well-known cryptocurrency exchange WazirX.

A search operation was carried out under the Prevention of Money Laundering Act (PMLA) on August 3, 2022, due to the director of the WazirX exchange’s lack of cooperation. It was discovered that Sameer Mhatre, Director of WazirX, has full remote access to the WazirX database, even though he is withholding information about transactions involving the crypto assets that were bought with the proceeds of the Instant Loan App fraud.

According to the agency, WazirX is unable to account for the lost cryptocurrency assets due to inadequate KYC standards, loose regulatory monitoring of transactions between WazirX and Binance, and non-recording of transactions on Blockchains to save money, and non-recording of the KYC of the opposing wallets.

It has not attempted to locate these cryptocurrency holdings. It has deliberately helped roughly 16 accused fintech companies launder criminal funds using the crypto method by promoting obscurity and having inadequate AML standards. Therefore, according to the enforcement agency, equivalent movable assets valued at Rs 64.67 crore ($8.1 million) that were held by WazirX were frozen in accordance with the Prevention of money laundering act (PMLA) of 2002.

A number of Indian non-banking finance companies (NBFCs) and their fintech partners are the targets of Money Laundering investigations by the Enforcement Directorate because they engage in predatory lending practices that violate RBI guidelines and employ telemarketers who abuse callers’ personal information to extort high-interest rates from borrowers.

In order to conduct the lending activity, a number of fintech companies supported by Chinese investors were unable to obtain an NBFC licence from the Reserve Bank of India (RBI). To leverage their licencing, they came up with the MoU approach with defunct NBFCs

Many of these fintech Apps have shut down since the criminal probe officially began and have transferred the enormous earnings they had been making using the mentioned method, according to the ED. The agency further discovered that a significant sum of money was diverted by fintech companies to buy Crypto assets and then launder them abroad when conducting fund trail investigations. These businesses and virtual assets are currently untraceable.

As reported by the ED, it was revealed during the investigation that Zanmai Labs Pvt Ltd, the organisation that owns WazirX Crypto Exchange, had set up a web of contracts with Crowdfire Inc. in the United States, Binance (Cayman Islands), and Zettai Pte Ltd. in Singapore in order to conceal its ownership of the cryptocurrency exchange.

The company’s managing director, Nischal Shetty, had previously asserted that WazirX is an Indian exchange that manages all crypto-crypto and INR-crypto trades and only has an IP and preferential agreement with Binance. However, Zanmai currently asserts that they only participate in INR-crypto transactions and that Binance handles all other transactions on WazirX.

Changpeng Zhao, the CEO of US-based cryptocurrency exchange Binance, asserted on August 5 that the business does not control Indian cryptocurrency exchange WazirX, despite a deal that was reportedly finalized back in 2019. Although Zhao claimed that the transaction was never completed, it was assumed that the acquisition had been finalized after Binance announced in a blog post in January 2019 that it had bought WazirX.

Zhao linked the inability of the parties to reach an agreement on “a few” problems. He added that it is difficult to explain the reasons why the agreement could not be completed.

“Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders. Binance only provides wallet services for WazirX as a tech solution. There is also integration using off-chain tx, to save on network fees. WazirX is responsible for all other aspects of the WazirX exchange, including user sign-up, KYC, trading, and initiating withdrawals.”

WazirX was repeatedly given the chance to provide the cryptocurrency transactions of the questionable fintech APP companies and show the KYC of the wallets, but it never did. The enforcement directorate claimed that the majority of transactions were not stored on the blockchain.

The company stated that before July 2020, they didn’t even keep track of the bank account information used to send money into the exchange to buy cryptocurrency. The physical address is not verified. There is no oversight of their clients’ funding sources.

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