India Freezes Crypto Exchange Wazirx’s Bank Assets – Binance Claims Wazirx Acquisition Was ‘Never Completed’ – Bitcoin News Exchange

A major Indian cryptocurrency exchange, Wazirx, has had its bank assets of more than $8 million frozen by the Enforcement Directorate (ED). The exchange was supposedly acquired by Binance in 2019. However, Binance CEO Changpeng Zhao (CZ) now claims that the acquisition “never went through.” However, Wazirx claims that it was acquired by Binance.

ED’s action against Wazirx

India’s Enforcement Directorate (ED) issued a press release on Friday about Wazirx, a major crypto exchange in India. ED is a law enforcement and economic intelligence agency of the Government of India. Announcement Details:

The Enforcement Directorate (ED) has conducted searches on one of the directors of M/s Zanmai Lab Pvt Ltd, which owns the popular cryptocurrency exchange Wazirx and has issued a freezing order to freeze their bank balances worth INR 64.67 crore.

The ED stated that this action is part of its money laundering investigation against non-banking financial companies (NBFCs) and their fintech partners for “predatory lending practices in violation of the RBI [Reserve Bank of India] guidelines.”

The announcement describes: “The ED found that large amounts of funds were diverted by the fintech companies to purchase crypto-assets and then launder them abroad. These companies and virtual assets are currently untraceable.”

The ED alleged that Zanmai Labs created a web of agreements with Crowdfire Inc. (US), Binance (Cayman Island) and Zettai Pte Ltd. (Singapore) “to conceal the ownership of Wazirx.” The authority further claimed that Wazirx gave “contradictory” and “ambiguous” answers “to avoid oversight by Indian regulatory agencies,” noting that the exchange failed to provide crypto transactions to suspected fintech companies.

“Due to the non-cooperative stand of the director of the Wazirx exchange, a search operation was conducted,” the ED stressed. “It was found that Mr. Sameer Mhatre, director of Wazirx, has complete remote access to the database of Wazirx, but despite that he does not provide the details of the transactions related to crypto-assets, purchased from the proceeds of crime of the Instant Loans APP scam.” The police further claimed:

The lax KYC norms, loose regulatory control of transactions between Wazirx and Binance, non-recording of transactions on blockchains to save costs and non-recording of KYC for opposite wallets have ensured that Wazirx is unable to provide any account for the missing crypto assets. It has made no attempt to track these crypto assets.

“By encouraging obscurity and having lax AML norms, it has actively helped around 16 accused fintech companies launder the proceeds of crime using the crypto route. Therefore, corresponding movable property to the extent of Rs. NOK 64.67 million [$8.14 million] lying with Wazirx was frozen,” concludes the ED notice.

Binance’s statements on the acquisition of Wazirx

After seeing media reports that his exchange was mentioned in connection with Wazirx, Binance CEO Changpeng Zhao (CZ) tired on Twitter that his company “does not own any shares in Zanmai Labs.”

Zhao claimed:

On November 21, 2019, Binance published a blog post stating that it had “acquired” Wazirx. This transaction was never completed. Binance has never – at any time – owned any shares in Zanmai Labs, the entity that operates Wazirx.

“Binance only provides wallet services for Wazirx as a technical solution. There is also integration using off-chain tx, to save on network fees. Wazirx is responsible for all other aspects of the Wazirx exchange, including user registration, KYC, trading and initiation of withdrawals,” explained CZ.

“Recent allegations about the operation of Wazirx and how the platform is managed by Zanmai Labs are of deep concern to Binance. Binance is cooperating with law enforcement agencies worldwide. We would like to work with the ED in any way possible,” the Binance CEO emphasized.

CZ’s clarification shocked many in the Indian crypto community since they were under the impression that Wazirx is a Binance company.

Clarification of Wazirx’s Founder, Binance’s Warning

In an attempt to clarify the relationship between Wazirx and Binance, Wazirx founder Nischal Shetty insisted on Twitter that his exchange was actually acquired by Binance.

He added that Zanmai Labs, an entity co-owned by him, has been licensed by Binance to operate INR-crypto trading pairs on Wazirx while Binance operates crypto-to-crypto pairs and processes crypto withdrawals.

He asked investors not to confuse Zanmai Labs and Wazirx, revealing that Binance owns the Wazirx domain name, has root access to its AWS servers, owns all crypto assets and receives all crypto profits.

Responding to Shetty’s tweets, CZ confirmed: “We could shut down Wazirx. But we can’t because it hurts the users.” He added that Binance does not have operational control, including “user registration, KYC, trading and withdrawal initiation,” noting that they are controlled by Wazirx’s founding team. The Binance CEO stressed: “This was never transferred, despite our requests. The deal was never closed. No share transfers.”

CZ further tweeted:

If you have funds on Wazirx, you should transfer it to Binance. As simple as that. We can disable Wazirx wallets on a technical level, but we can’t/won’t. And as many debates as we endure, we cannot/will not harm the users.

What do you think about the situation of the Indian crypto exchange Wazirx? Let us know in the comments section below.

Kevin Helms

A student of Austrian economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of finance and cryptography.