The ED issued notices to director Nischal Shetty and Sameer Hanuman Mhatre of Zanmai Labs Private Limited which runs WazirX. The company acts as a platform for trading in digital currencies such as bitcoin, tron, litecoin and ripple.
The ED stumbled upon the company’s transactions during an ongoing money laundering investigation into Chinese-owned illegal online betting apps. The ED said: “Chinese nationals had laundered proceeds of crime worth Rs 57 crore by converting the deposits into cryptocurrency tether (USDT) (Tether is a controversial cryptocurrency with tokens issued by Tether Limited) and then transferring the same to Binance (Binance is an online exchange where users can trade cryptocurrencies) wallets based on instructions received from abroad.” Binance is an exchange registered in Cayman Islands.
WazirX allows a wide range of transactions with cryptocurrencies, including exchange with rupees, and vice-versa. It also allowed person to person transactions and and even transfer/receipt of cryptocurrency held in its pool accounts to wallets of other exchanges which foreigners could hold in foreign locations,” the ED said.
The ED found that the users of WazirX via its pool account received cryptocurrency worth Rs 880 crore from Binance accounts and transferred out cryptocurrency worth Rs 1,400 crore to Binance accounts. “None of these transactions is available on the blockchain for any audit,” it said.
WazirX does not collect the requisite documents in violation of the mandatory anti-money laundering and combating of financing of terrorism precaution norms and FEMA guidelines. The ED alleged, “It was found that WazirX clients could transfer valuable cryptocurrencies to any person irrespective of its location and nationality without any proper documentation.”