The Enforcement Directorate (ED) is investigating at least 10 cryptocurrency exchanges for alleged money laundering of Rs 1,000 crore after conducting raids on WazirX. According to the Economic Times, the funds originated from a company charged with money laundering in another instant loan app case. The company is said to have connections in China.

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The accused company, as per the report, approached multiple crypto exchanges to purchase crypto coins worth more than Rs 100 crore. The cryptocurrencies were transferred to overseas wallets. These exchanges failed to complete due diligence and raise suspicious transaction reports (STRs).

“While so far the agency has frozen the accounts of WazirX, similar transactions have taken place on the other exchanges and they have been asked to join the probe,” reported ET citing sources.

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Additionally, know your customer (KYC) procedures for all of their investors must be completed by cryptocurrency exchanges. However, it was discovered that numerous exchanges did not perform KYC properly. Many investors were tracked down using their KYC information, but they were shown to be false or different from the real ones. Many corporations reportedly whisked off the money abroad once the investigation began. 

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“Once these firms learned that they were under the scanner, they shut shop and used the crypto route to siphon the funds abroad. The opaque nature of the crypto ecosystem and the industry not being regulated provided the requisite cover for these firms to park their assets offshore,” ET report quoted a person aware of the matter.

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The social media spat between WazirX CEO Nischal Shetty and Binance CEO Changpeng Zhao is also being monitored by ED. Both CEOs tweeted about their ownership of WazirX.

CZ took to Twitter on August 5 to clarify the company’s relationship with WazirX, in what appears to be an attempt to move Binance away from probes.

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“Binance does not own any equity in Zanmai Labs, the entity operating WazirX,” he said in a tweet. He explained that the previously announced acquisition of WazirX in 2019 “was never completed” and that Binance had never “owned any shares of Zanmai Labs.”

Shetty responded quickly. He said that Zanmai Labs is a distinct entity controlled by the WazirX founders that have been licenced by Binance to “operate INR-Crypto pairs in WazirX.” Binance, on the other hand, works on WazirX and charges fees for crypto-to-crypto trading and crypto withdrawals. He further claimed that WazirX had relinquished ownership of its domain name and AWS servers, leaving just Zanmai Labs.

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The big shock came when CZ urged WazirX customers to transfer their assets to Binance, claiming that the business “could disable WazirX wallets” but would not because it would “hurt users.” Shetty promptly pointed out that the ability to shut down wallets demonstrated that Binance controlled and operated WazirX.

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In connection with a money laundering probe, the ED has blocked WazirX’s bank accounts worth Rs 65 crore.