The financial crime-fighting agency of MUMBAI India said it had frozen the assets of WazirX linked to the world's largest digital currency exchange Binance as part of its investigation into suspected violations of foreign exchange regulations.
A spokesman for WazirX, said that the federal Enforcement Directorate ED has froze assets worth 646.70 million rupees $8.16 million and was fully cooperating with the Enforcement Directorate for several days.
We do not agree with the allegations in the ED press release. We are evaluating our plan of action. The agency said it was involved in an investigation of the exchange's suspected role in assisting instant loan app companies in laundering the proceeds of crime by converting them into cryptocurrencies on its platform.
One of the directors of Zanmai Lab, which owns WazirX, was the subject of the searches.
The ED said it was conducting money-laundering investigations against several shadow banks and their fintech companies for violation of central bank norms and indulging in predatory lending practices.
While doing fund trail investigation, large amounts of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. The maximum amount of funds was diverted to WazirX exchange and the digital assets so purchases have been diverted to unknown foreign wallets, it said in a release.
The investigation said that a lot of these fintech companies dealing in illegal lending practices were backed by Chinese funds. The ED launched an investigation last year into WazirX for suspected violations of foreign exchange regulations.
On Friday, the company did not own shares in Zanmai Labs, according to the CEO of the company, Changpeng Zhao. On 21 November 2019, Binance published a blog post that it had 'acquired' WazirX. This transaction was never completed. Zhao tweeted that Binance had never owned any shares of Zanmai Labs.
He said that Binance only provides wallet services for WazirX as a tech solution.
In 2021, the ED was looking into a money laundering case involving Chinese-owned illegal online betting applications. The ED had said that the laundered proceeds of crime were worth around 570 million rupees and were being converted into cryptocurrencies using the Binance platform.