Wazirx, a leading Indian cryptocurrency exchange, has had over $8 million in bank assets frozen by the Executive Directors (ED). The exchange was reportedly acquired by Binance in 2019. However, Binance CEO Changpeng Zhao (CZ) now claims that the acquisition was “never completed.” Wazirx, however, claims to have been acquired by Binance.
ED’s actions against Wazirx
India’s Directorate of Enforcement (ED) issued a press releaseon Friday regarding Wazirx, India’s leading crypto exchange The ED is the law enforcement and economic intelligence agency of the Indian government. Details of the announcement are as follows.
The ED (Directorate of Enforcement) has conducted a search against one of the directors of M/s Zanmai Lab Pvt Ltd, which owns the popular cryptocurrency exchange Wazirx, and issued a freeze order on bank balances amounting to INR 64.67 billion.
The ED said the action is part of a money laundering investigation into “predatory lending practices in violation of RBI (Reserve Bank of India) guidelines” against non-banking financial companies (NBFCs) and their fintech partners.
The announcement describes it as follows:” ED has discovered that large amounts of funds are being diverted by fintech companies to purchase crypto assets and launder them offshore. These companies and virtual assets are untraceable at this time.”
ED claimed that Zanmai Labs created a web of contracts with Crowdfire Inc (USA), Binance (Cayman Island), and Zettai Pte Ltd. (Singapore) to “obscure the ownership of Wazirx,” the agency claimed. The authorities further alleged that Wazirx gave “contradictory” and “ambiguous” answers “to avoid scrutiny by Indian regulators,” and noted that the exchange did not provide crypto transactions of suspicious fintech companies.
“The search operation was conducted because of the uncooperative attitude of the director of the Wazirx exchange,” the ED stressed.” Sameer Mhatre, director of Wazirx, was found to have full remote access to the Wazirx database, nevertheless, he did not provide transaction details regarding crypto assets purchased from the criminal proceeds of the Instant Loan APP scam ” he stated. Law enforcement further asserted.
lax KYC norms, loose regulatory control of transactions between Wazirx &and non-recording of transactions. Binance, non-recording of transactions on the blockchain to reduce costs, and KYC non-recording of opposing wallets ensure that Wazirx cannot give any account for missing crypto assets. No effort is also made to track these crypto assets.
“Encouraging obscurity and lax AML norms actively assisted approximately 16 accused fintech companies to launder their criminal proceeds using the crypto route. Therefore, movable assets worth 64.67 Croatian rupees ($8.14 million) lying in Wazirx were frozen,” the ED’s announcement concluded.
Binance statement on the acquisition of Wazirx
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After seeing media reports that his exchange was mentioned in connection with Wazirx, Binance CEO Changpeng Zhao (CZ) took to Twitterto say that his company “does not hold any interest in Zanmai Labs.” He stated that his company “does not own any interest in Zanmai Labs.
Zhao claimed.
On November 21, 2019, Binance published a blog post stating that it had “acquired” Wazirx. The transaction was never completed; Binance never owned any shares of Zanmai Labs, which operates Wazirx, at any point in time.
“Binance only provides wallet services to Wazirx as a technical solution. There is also an off-chain TX integration to save on network fees; Wazirx is responsible for all other aspects of the Wazirx exchange, including user signups, KYC, initiating transactions and withdrawals,” CZ explained.
“Recent allegations regarding Wazirx’s operations and how the platform is managed by Zanmai Labs are of deep concern to Binance. Binance works with law enforcement agencies around the world. We are happy to cooperate with ED in any way possible,” the Binance boss stressed.
The CZ clarification shocked many in the Indian crypto community as they were under the impression that Wazirx was a Binance company.
Clarification by Wazirx founder, warning of Binance
Clarifying the relationship between Wazirx and Binance, Wazirx founder Nischal Shettyclaimedon Twitter that his exchange had indeed been acquired by Binance.
He added that Zanmai Labs, an entity he co-owns, is licensed by Binance to operate INR-crypto trading pairs on Wazirx, while Binance operates crypto-to-crypto pairs and processing, he added.
He asked investors not to confuse Zanmai Labs with Wazirx, clarifying that Binance owns Wazirx’s domain name, has root access to its AWS servers, has all crypto assets, and receives all crypto profits.
In response to Shetty’s tweet, CZ confirmed: “We could shut down Wazirx. But we can’t because it hurts our users.” He added that Binance does not have operational controls, including “user signups, KYC, initiating transactions and withdrawals,” noting that they are managed by Wazirx’s founding team. The CEO of Binance stressed that ” This was never transferred despite our request. No transactions have ever been concluded. There is no transfer of shares.”
If you have money in Wazirx, you should transfer it to Binance. It’s simple. We could disable the Wazirx wallet on a technical level, but we can’t and won’t. And like many of the arguments we endure, we can’t/won’t hurt our users.
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