Per a press release from India’s Enforcement Directorate (ED), crypto exchange Binance is allegedly involved in a money laundering scheme created with WazirX. This entity operates as a crypto exchange platform in this country; one of its offices was raided on August 3rd, as a result of an ongoing investigation.
Binance’s CEO Changpeng Zhao has denied the allegations, stating that the company has no financial ties with WazirX and that it neither owns any equity in Zanmai Labs. According to the release from the Indian authorities, the latter is WazirX’s parent company and one of the main alleged actors in the money laundering scheme.
As a consequence of the raid, local authorities freeze over $8 million or 64.67 Indian Crore (INR) from bank balances associated with WazirX. The ED claims a number of companies have been allegedly operating a lending business without a license by diverting funds in the form of cryptocurrencies to WazirX.
These funds are used to allegedly launder money under a scheme that involves “unknown foreign wallets” and phantom fintech firms. The release claims:
ED is conducting Money Laundering investigation against number of Indian NBFC (Non-Banking Financial Companies) companies & their fintech partners for predatory lending practices in violation of the RBI guidelines and by using tele-callers who misuse personal data and use abusive language to extort high interest rates from the loan takers.
The investigation led authorities to question Nischal Shetty, Managing Director at Zanmain Labs, the company supposedly controlling WazirX. The executive claims that Binance handles a majority of the transactions for WazirX.
The authorities believe that the suspects have been providing “contradictory and ambiguous answers” to obscure the investigation. In addition, the ED believes that the crypto exchange platform failed to implement robust Know Your Customer (KYC) and Anti Money Laundering (AML) policies.
Was Binance Involved In This Alleged Money Laundering Scheme?
Furthermore, the authorities said that the parties have gone out of their way to hide transactions. The ED also questioned Sameer Mhatre, Director of WazirX, but was unable to collect more information about the transactions linked to the exchange platforms. The release added:
The lax KYC norms, loose regulatory control of transactions between WazirX & Binance, non-recording of transactions on Blockchains to save costs and non-recording of the KYC of the opposite wallets has ensured that WazirX is not able to give any account for the missing crypto assets. (…) By encouraging obscurity and having lax AML norms, it has actively assisted around 16 accused fintech companies in laundering the proceeds of crime using the crypto route.
Binance’s CEO clarified that the exchange announced a deal to acquire WazirX, but that the transaction was “never completed”. The executive said that their platform “only provides wallet services” and pointed out that all responsibilities for running the platform are solely on WazirX.
Zhao acknowledged that the accusations against WazirX are “concerning”, and claims that they constantly collaborate with “enforcement agencies all around the world” and offered their help to ED and Indian authorities.
The latter said that they tried to contact Binance via their [email protected] contact, but the company “rarely responds to queries”.