Binance-owned exchange WazirX's bank balances frozen by Indian authorities

Quick Take

  • India’s Enforcement Directorate has frozen WazirX’s bank balances worth around $8 million.
  • The agency has been investigating WazirX for its alleged role in money laundering.

India's Enforcement Directorate (ED), a law enforcement agency that investigates financial crimes, has frozen bank balances worth 647 million rupees (around $8 million) belonging to WazirX, a local crypto exchange owned by Binance.

ED conducted searches on WazirX co-founder and CTO Sameer Mhatre as part of its money laundering probe against the exchange, according to a statement on Friday. ED has been investigating WazirX since last year for its alleged money laundering role linked to Chinese loan apps that were involved in digital lending in India.

Since 2019, most Chinese companies were reportedly entering India for lending business by establishing fintech apps, but as the Reserve Bank of India (RBI) was not giving them a non-banking financial company (NBFC) license, they were making agreements with local NBFCs.

As a result, ED has lately been investigating a number of Indian NBFC companies and their fintech partners "for predatory lending practices in violation of the RBI guidelines and by using tele-callers who misuse personal data and use abusive language to extort high-interest rates from the loan takers," the agency said in Friday's announcement.

After the investigations began, many of these fintech apps shut down and diverted away "huge profits" through various routes, including crypto, according to ED.

"ED found that large amount of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad," reads the announcement. "These companies and the virtual assets are untraceable at the moment."

As part of its investigations, ED also issued summons to crypto exchanges and found out that "maximum amount of funds were diverted to WazirX exchange and the crypto-assets so purchased have been diverted to unknown foreign wallets."

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WazirX and Mhatre have been uncooperative in helping to trace those funds, according to ED. Mhatre has "complete remote access to the database of WazirX, but despite that he is not providing the details of the transactions relating to the crypto assets, purchased from the proceeds of crime of Instant Loan APP fraud," ED said.

It went on to say that "the lax KYC [know your customer] norms, loose regulatory control of transactions between WazirX and Binance, non-recording of transactions on blockchains to save costs and non recording of the KYC of the opposite wallets has ensured that WazirX is not able to give any account for the missing crypto assets."

WazirX has also made no efforts to trace crypto assets and Binance "rarely responds to queries on [email protected]," according to ED.

"We have been fully cooperating with the Enforcement Directorate (ED) for several days and have responded to all their queries fully and transparently," WazirX said in a statement to The Block. "We do not agree with the allegations in the ED press release. We are evaluating our further plan of action."

Binance did not respond to The Block's request for comment by press time.

Updates with comment from WazirX.


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About Author

Yogita Khatri is a senior reporter at The Block, covering all things crypto. As one of the earliest team members, Yogita has played a pivotal role in breaking numerous stories, exclusives and scoops. With nearly 3,000 articles under her belt, Yogita holds the records as The Block's most-published and most-read author of all time. Prior to joining The Block, Yogita worked at crypto publication CoinDesk and The Economic Times, where she wrote on personal finance. To contact her, email: [email protected]. For her latest work, follow her on X @Yogita_Khatri5.