Nischal Shetty and Sameer Mhatre, the directors of popular cryptocurrency exchange platform WazirX, were handed a show-cause notice by the Enforcement Directorate (ED) earlier today. The notice was issued under the Foreign Exchange Management Act (FEMA), 1999, for supposedly violating guidelines linked to transactions to the tune of Rs. 2,790.74 crores.
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The ED on WazirX
The show-cause notice was issued by the ED following a probe into money laundering on Chinese online betting apps. Reports suggest that some Chinese nationals have laundered an approximated Rs. 57 crores obtained through criminal activities using the cryptocurrency Tether. Based on certain “instructions received from abroad”, the money was reportedly transferred to Binance Wallet, based in the Cayman Islands. The ED has also claimed that WazirX users have received cryptocurrencies worth Rs. 880 crores from Binance Wallet accounts and have sent digital currencies worth close to Rs. 1400 crores to Binance accounts.
The ED claims, the feature of WazirX where users can transfer or receive digital currencies that are held in their pool accounts, could be transferred to people overseas using other wallets. They have stated:
“WazirX does not collect requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines. It was found that the WazirX clients could transfer ‘valuable’ cryptocurrencies to any person irrespective of location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/other illegitimate activities.”
The Other Side
WazirX is a very popular crypto-exchange platform of Indian origin. The platform allows users to trade in anything from Bitcoin, Ethereum, etc. The platform gives users the ability to exchange digital currencies with rupees, exchange of one cryptocurrency with another, and even transactions from one individual to another.
Nischal Shetty, one of the WazirX directors, has claimed that the company is yet to receive any such show-cause notice from the ED. He has also clarified that his company has already fully complied with Know-Your-Customer (KYC) and AML procedures and obligations. Shetty goes on to say that WazirX has always cooperated with enforcement authorities to provide information whenever required. He adds that they possess the ability to trace all users on their platform with the provided identity information.
The director concluded by affirming his stance on the whole situation and has said that if the company does receive any form of communication or notice from the ED, the will fully cooperate with the impending information.