New Delhi, Aug 5 The Enforcement Directorate (ED) on Friday conducted searches at the premises of one of the directors of Zanmai Lab Pvt Ltd, which owns the popular cryptocurrency exchange WazirX, and issued an order to freeze its bank balances to the tune of Rs 64.67 crore.
The ED is conducting a money laundering investigation against a number of Indian NBFC companies and 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 ED official said that various fintech companies backed by Chinese funds could not get a NBFC license from the RBI for carrying on a lending business. So they devised the MoU route with defunct NBFCs to piggyback on their license.
"After the criminal investigation began, many of these fintech APPs have shut shop and diverted away the huge profits earned using the above modus operandi," the official said.
While doing the fund trail investigation, the ED found that funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. These companies and the virtual assets are untraceable at the moment. Summons were issued to the crypto-exchanges. It is seen that the maximum amount of money was diverted to WazirX exchange and the crypto-assets so purchased have been diverted to unknown foreign wallets.
"Zanmai Labs Pvt Ltd - the company owning WazirX Crypto Exchange - has created a web of agreements with Crowdfire Inc. USA, Binance (Cayman Islands), Zettai Pte Ltd Singapore, to obscure the ownership of the crypto exchange. Earlier, their Managing Director Nischal Shetty had claimed that WazirX is an Indian Exchange which controls all the crypto-crypto & inr-crypto transactions and only has an IP and preferential agreement with Binance. But now, Zanmai claims that they are involved in only inr-crypto transactions, and all the other transactions are done by Binance on WazirX. They are giving contradictory & ambiguous answers to evade oversight by Indian regulatory agencies," the ED has observed.
WazirX works from a Cloud based software (@AWS Mumbai), all employees work from home, the registered office is a 2 chair co-working Wework space, and all crypto-crypto transactions are controlled by Binance {which is again without any known office, any known employee and rarely responds to queries on legal@binance.com}.
The ED said that despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech APP companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also.
WazirX informed the ED that prior to July 2020, they did not even record the details of the bank account from which funds were coming into the exchange to purchase crypto assets.
"No physical address verification is done. There is no check on the source of funds of their clients. No EDD is done. No STRs were raised," the ED alleged.
The official said that because of the non-cooperative stand of the Director of WazirX exchange, a search operation was conducted under PMLA on August 3 and it was found that Sameer Mhatre, Director WazirX, has complete remote access to the database of WazirX, but despite that he is not providing the details of the transactions relating to the crypto assets, purchased from the proceeds of crime of Instant Loan APP fraud.
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