Notice issued to WazirX and its directors for alleged money laundering transactions

WazirX logo

A show-cause notice has been issued by Directorate of Enforcement (ED) to cryptocurrency exchange WazirX, and its directors Nischal Shetty and Sameer Hanuman Mhatre. The notice has been issued under Foreign Exchange Management Act, 1999 (FEMA) for transactions involving crypto-currencies worth ₹2790.74 crore.

The investigations were initiated on the basis of the ongoing money-laundering investigation into Chinese owned illegal online betting applications. It was seen that the accused Chinese nationals had laundered money worth ₹57 crores. This money was converted to INR deposits into cryptos Tether(USDT), then this was transferred to Binance wallets. Binance is a crypto-currency exchange registered in Cayman Islands.

WazirX and the allegations

WazirX allows a wide range of cryptocurrency transactions including INR exchange and vice-versa, person to person (P2P) transactions, and even transfer/receipt of cryptocurrency held in its pool accounts to wallets of other exchanges which could be held by foreigners in foreign locations. The allegation was that WazirX does not collect the requisite documents for account opening. This is in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines. 

In the period under investigation, users of WazirX via its pool account, have received incoming cryptocurrency worth ₹880 crore from Binance accounts and transferred out cryptocurrency worth ₹1400 Crore to Binance accounts. 

None of these transactions is available on the blockchain for any audit or investigation. It was found that the WazirX clients could transfer ‘valuable’ cryptocurrencies to any person irrespective of their location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/other illegitimate activities

The battle

On it’s official Twitter account, ED has published news regarding the notice. However, WazirX’s founder, Nischal Shetty has denied receiving any such notice.

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