WazirX is a cryptocurrency exchange based in India that allows users to trade a variety of digital currencies.
Under the Foreign Exchange Management Act (FEMA) 1999, the Enforcement Directorate (ED) issued a show-cause notice to cryptocurrency exchange WazirX and its directors Nischal Shetty and Sameer Mhatre on June 11 for transactions involving cryptocurrencies valued Rs 2,790.74 crore.
The FEMA inquiry was launched by the ED as part of an ongoing money laundering investigation into Chinese-owned "illegal" online betting applications, according to a statement from the agency.
According to the ED, users of WazirX received incoming cryptocurrency worth Rs 880 crore from Binance accounts and transferred out digital currencies worth Rs 1,400 crore to Binance accounts during the investigation period. "For any audit/investigation, none of these transactions are available on the blockchain," ED noted.
ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.— ED (@dir_ed) June 11, 2021
The platform allows for cryptocurrency transactions such as the exchange of digital currencies for Indian rupees and vice versa; cryptocurrency exchange; person-to-person transactions; and the transfer or receipt of cryptocurrencies held in its pool accounts to wallets of other exchanges, which, according to the ED, could be held by foreigners overseas.
The RBI had instructed banks to conduct necessary customer due diligence in accordance with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Counter-Terrorism Financing (CFT), and regulated entity obligations under the Prevention of Money Laundering Act (PMLA), 2002.
WazirX "clearly violates the basic obligatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) prudence regulations and FEMA guidelines" by failing to acquire required paperwork, according to the ED.