India’s Directorate of Enforcement (ED), responsible for enforcing economic laws and fighting economic crime, is investigating two cases against crypto exchange WazirX under the Foreign Exchange Management Act of 1999 (FEMA), reported local media.
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Fast facts
- Zanmai Labs, operator of WazirX.com, one of India’s largest cryptocurrency exchanges by volume, was using the walled infrastructure of Binance, according to local media reports. Binance had acquired WazirX in November 2019.
- India’s Ministry of Finance reportedly told the upper house of Parliament on Aug. 2 that all crypto transactions between these two exchanges – Binance and WazirX – were not recorded on the blockchains and were thus cloaked in mystery.
- A show cause notice was issued under the provisions of FEMA against WaxirX for allegedly allowing outward remittance of crypto assets worth 277.57 million Indian rupees (US$3.49 million) to unknown wallets.
- The media reports said the finance ministry alleged WazirX has, on the request of foreign users, allowed conversion of one crypto into another by using transfer from third-party exchanges namely FTX, Binance, etc.
- “Zanmai Labs has taken legal recourse against the proceedings in question, and denies any allegations of wrongdoing. We are extending full cooperation and expeditiously providing all information that is required by the LEA (Law Enforcement Agency),” WazirX said in a statement emailed to Forkast.
- This is not the first time that India’s ED is questioning WazirX. It had issued a show cause notice to WazirX in June 2021 for alleged foreign exchange violations involving about US$382 million. The ED last month reportedly contacted Indian crypto exchanges, including CoinDCX and CoinSwitch, to probe possible violations of foreign exchange rules.
See related article: India’s crypto tax will incur losses for government, says WazirX CEO