WazirX comes under fire over alleged Policy violations!
Money laundering is something that can happen through Crypto Exchanges. With increasing security, it is still possible to exploit such services. The allegations are pretty severe, although WazirX directors Nischal Shetty and Hanuman Mhatre have been vocal about complying with any investigation.
What is the ED and What are its allegations?
The ED or Enforcement Directorate is an organization that is a part of the Government of India, Department of Revenue, and Ministry of Finance. It handles issues relating to preventing economic crimes, specifically money laundering offenses. A key role of the ED that is relevant to this case is the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act,1974(COFEPOSA) in regards to the violation of FEMA (Foreign Exchange Management Act) that supports cases of preventive detention. FEMA manages the flow of foreign currency, promoting foreign exchange, and boosts external trade.
The ED issued a show-cause notice which if you are not aware (so was I), is a Court order that requires a particular organization to be summoned and defend itself against any alleged legal action. The allegation is regarding violating foreign exchange laws involving crypto transactions of Rs 2,790 crore($380 million dollars). It has also linked this investigation to an ongoing search into illegal Chinese online betting applications. This was done by converting rupees into the cryptocurrency, Tether (USDT) after which it was transferred to Binance wallets according to the ED. The most revealing part of this investigation was when WazirX received cryptocurrency worth ₹880 crores from Binance accounts and transferred cryptocurrency worth ₹1,400 crores to Binance accounts. The ED also couldn’t find any data on the blockchain relating to these transactions. Allegedly, WazirX also did not maintain essential documents which is not only a big red flag but also comes off as not being transparent.
WazirX’s response to the alleged claims and its alacrity!
WazirX has been a strong advocate for cryptocurrencies and has a pretty good track record when it comes to standing up against the RBI’s decision to ban cryptocurrencies. Binance had acquired WazirX in the latter half of 2019. Judging by the alleged violations from the ED, they both seem to be at fault. Binance has yet to officially respond to any of the alleged claims. WazirX has also said on Twitter that it is going to willingly participate in any investigation. They have also assured that the funds of users are completely safe. Although the disparity between WazirX and the ED’s claim on whether the notice was issued is concerning. Many followers of WazirX have voiced their support in regards to the allegations, claiming that they shouldn’t be afraid of the government.
PUBLISHED BY
DWAYNE D’CUNHA, WRITER ON MEDIUM.
Originally published at https://www.linkedin.com.
