Indian law enforcement agency alleges crypto exchange WazirX violated FEMA rules

Quick Take

  • India’s Directorate of Enforcement has alleged that crypto exchange WazirX violated the Foreign Exchange Management Act (FEMA) rules.
  • The agency has issued a show cause notice to the exchange.

India's Directorate of Enforcement — a law enforcement agency responsible for fighting financial crime in the country — has alleged that local crypto exchange WazirX violated the Foreign Exchange Management Act (FEMA) rules.

The Directorate of Enforcement, known as ED in India, announced Tuesday that it has issued a show cause notice to WazirX "for alleged contravention of Sec 3(a) of Foreign Exchange Management Act, 1999, (FEMA) for transactions involving crypto-currencies worth an amount of INR 2790,74,17,699." In US dollar terms, that's around $382 million.

The agency issues show cause notices when it thinks that a company has been party to misconduct. The company is then required to submit its reply to a disciplinary authority as to why action should not be initiated against it.

ED says it has issued a show cause notice to Zanmai Labs Pvt Ltd (a registered entity of WazirX), as well as WazirX co-founder and CEO Nischal Shetty and its co-founder Sameer Hanuman Mhatre.

Shetty told The Block that "WazirX is yet to receive any show cause notice from the Enforcement Directorate."

How the exchange came on the agency's radar

For the pa