ED conducts research at WazirX owner Zanmai Lab

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The Law Enforcement Branch on Friday conducted raids on one of the directors of Zanmai Lab Pvt. Ltd, which operates the WazirX cryptocurrency exchange, and froze the exchange’s bank balances worth 64.67 crore.

In the statement on Twitter, the anti-money laundering agency said it seized the assets of the exchange “for helping accused instant loan app companies launder fraudulent money through the purchase and transfer of virtual crypto assets”.

On Wednesday, Pankaj Chaudhary, Minister of State for Finance, told Rajya Sabha lawmakers that the investigative agency had issued a notice to WazirX under the Foreign Exchange Management Act.

ED is investigating several non-bank financial companies (NBFCs) and their fintech partners for engaging in predatory lending practices in violation of Reserve Bank of India guidelines and using telemarketers who use callers’ personal information and a foul language to extract usurious interest rates.

Many fintech companies that failed to obtain NBFC licenses from RBI used old NBFCs to lend money, according to the ED statement. Many of these fintech companies are backed by Chinese investors,

ED alleged that Zanmai Lab entered into a web of deals with Crowdfire Inc. in the US, Binance (Cayman Islands) and Zettai Pte Ltd in Singapore to conceal its ownership of the cryptocurrency exchange.

Nischal Shetty, the managing director of the company, had claimed that WazirX is an Indian exchange that handles all crypto-to-crypto and INR-to-crypto exchanges and has only intellectual property and preferential agreements with Binance. However, according to ED, Zanmai currently claims to only participate in INR-crypto transactions and Binance handles all other transactions on WazirX. To avoid regulation by regulators, they provide contradictory and unclear answers, the agency said.

“Despite repeated opportunities, WazirX failed to give crypto transactions of suspicious fintech app companies and reveal KYC of wallets. Most transactions are also not recorded on the blockchain,” he said.

Additionally, WazirX stated that prior to July 2020, they did not record bank account details from which funds were coming into the exchange to purchase crypto assets. No physical address verification was performed, nor was there any verification of the source of their clients’ funds, ED said.

“We have been cooperating fully with the Enforcement Directorate (ED) for several days and have answered all their questions in a full and transparent manner. We do not agree with the allegations contained in the ED press release We are evaluating our new action plan.” a company spokesperson said in a statement late Friday.

In a post on Twitter, Changpeng Zhao, CEO of Binance, said the company does not hold a stake in Zanmai Labs, the entity operating WazirX.

Further, to clarify the matter, Nischal Shetty, Founder and CEO of WazirX, took to Twitter saying “WazirX was acquired by Binance and Zanmai Labs is an Indian entity owned by me and my co-founders. Zanmai Labs has a license from Binance to mine INR-Crypto pairs in WazirX. Binance mines crypto to cryto pairs, processes crypto withdrawal…

Adding that one can check the above fact by going to TOS of WazirX. He even informed more facts about WazirX by stating that Binance owns the WazirX domain name. Binance has root access to AWS servers. While Binance also owns all the crypto assets and all the crypto profits. Don’t confuse Zanmai with WazirX, Shetty said.

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