Indian crypto exchange WazirX in probe over US$382M in suspect transactions

India’s Enforcement Directorate — the agency responsible for investigating foreign exchange and money laundering crimes — has issued a show cause notice to cryptocurrency exchange WazirX and its directors, Nischal Shetty and Sameer Mhatre, for alleged foreign exchange violations involving 27.9 billion rupees (US$382 million) related to cryptocurrency transactions.

Fast Facts:

• The enforcer announced the launch of its investigation in a tweet today, saying “ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA [the Foreign Exchange Management Act], 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.”

• “ED initiated FEMA investigation on the basis of the ongoing money laundering investigation into Chinese owned illegal online betting applications,” a statement said.

• “The accused Chinese nationals had laundered proceeds of crime worth Rs. 57 Crore approximately by converting the INR deposits into cryptocurrency Tether (USDT) and then transferring the same to Binance (exchange registered in Cayman Islands) Wallets based in instructions received from abroad,” the statement said. “WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines.”

• WazirX was acquired by Binance, the world’s biggest cryptocurrency exchange, in 2019. Binance is itself being investigated by the U.S. Department of Justice and Internal Revenue Service over alleged illegal activities.

• The directorate’s investigation comes amid regulatory uncertainty over India’s stance toward cryptocurrencies.

• According to a tweet thread from WazirX, the company has yet to receive a show cause notice from the Enforcement Directorate. It said: “WazirX is in compliance with all applicable laws. We go beyond our legal obligations by following Know Your Customer (KYC) and Anti Money Laundering (AML) processes and have always provided information to law enforcement authorities whenever required. We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in the investigation.”

• But a Twitter user was quick to share the directorate’s tweet with WazirX, saying: “It’s coming straight from ED’ twitter though?”