India investigating ‘mysterious’ transactions between WazirX and Binance

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Binance is once again the focus of investigations by a regulator, this time in India. The country’s Finance Ministry is probing transactions between the exchange and its Indian subsidiary, WazirX, which it says are “cloaked in mystery” and possibly violated foreign exchange laws.

Speaking to Rajya Sabha, the Indian parliament’s upper house, the Minister of State of Finance Pankaj Chaudhary revealed that the ministry is probing whether Binance and WazirX violated the Foreign Exchange Management Act, 1999 (FEMA).

WazirX, which is operated by Zanmai Labs Private Ltd., has reportedly been using a walled infrastructure to transact with its global parent exchange Binance, the ministry’s investigation has uncovered. 

“Further, it has been found that all crypto transactions between these two exchanges were not even being recorded on the blockchains and were thus cloaked in mystery.”

In accordance with the FEMA Act, the ministry, through its Enforcement Directory, has issued a show-cause notice to WazirX regarding the suspected laundering of Rs. 2,790 crore (over $350 million). The exchange allegedly facilitated the transfer of these funds to unidentified wallets, violating the country’s foreign exchange regulations.

This is not all. As the minister further revealed, the government is also probing allegations that WazirX has been allowing foreign users to use its platform without requiring them to meet the necessary know-your-customer (KYC) and anti-money laundering (AML) checks.

ED alleges that WazirX allowed these users to swap between digital currencies on its platform and accepted transfers from other global exchanges. The agency specifically mentioned Binance and FTX, the Sam Bankman-Fried exchange, as two of WazirX’s foreign partners.

The probe is the latest in a growing list of investigations into WazirX. As CoinGeek reported in July, the exchange was among those that the ED investigated for aiding crime through digital currencies. Earlier this year, WazirX was suspected of evading taxes amounting to $5 million. The agency claimed that the exchange used its native token to bypass taxation requirements in the country.

Going back a year, WazirX faced similar allegations of violating forex laws in India and illegally facilitating over $280 million in digital asset transfers.

As the exchange faces several probes, its two founders, Siddharth Menon and Nischal Shetty, decided to leave India, moving their families to Dubai in April. 

WazirX’s parent company Binance is notorious for flouting regulations and is being pursued by dozens of regulators globally. In fact, it’s currently facing a £9.9 billion class action lawsuit in the United Kingdom, along with Bittylicious, Kraken and Shapeshift, over its delisting of the Bitcoin SV (BSV) digital asset. And just like the two WazirX cofounders, Binance CEO Changpeng Zhao has also been heading the exchange remotely for the longest time, and despite mounting regulatory concerns, he has failed (or refused) to establish physical headquarters for Binance.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, 
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.