HYDERABAD: Enforcement Directorate, Hyderabad wing on Friday issued a show-cause notice to Cryptocurrency exchange WazirX and its directors under Foreign Exchange Management Act for transactions involving cryptocurrency worth Rs 2,790 crore.
ED issued notices to director Nischal Shetty and Sameer Hanuman Mhatre of Zanmai Labs that runs WazirX.
ED is probing FEMA violations on the basis of the ongoing money laundering investigation into Chinese owned illegal online betting applications.
ED said in a note, “Chinese nationals had laundered proceeds of crime worth Rs 57 crore by converting the deposits into cryptocurrency Tether (USDT) and then transferring the same to Binance Wallets based on instructions received from abroad.
Binance is an exchange registered in Cayman Islands.” The note said that WazirX allows wide range of transactions with cryptocurrencies, including exchange with rupees and vice-versa.
It also allowed exchange of cryptocurrencies, person to person transactions and even transfer/receipt of cryptocurrency held in its pool accounts to wallets of other exchanges which foreigners could hold in foreign location.
WazirX does not collect the requisite documents in clear violation of the basic mandatory anti-money laundering and combating of financing of terrorism precaution norms and FEMA guidelines.
ED found that the period under investigation, users of WazirX via its pool account, have received incoming cryptocurrency worth Rs 880 crore from Binance accounts and transferred out cryptocurrency worth Rs 1,400 crore to Binance accounts.
None of these transactions are available on the blockchain for any audit.
“It was found that the WazirX Clients could transfer ‘valuable’ crypto-currencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/ other illegitimate activities,” alleged ED.