The Enforcement Directorate (ED) has issued a show-cause notice to Indian cryptocurrency exchange platform WazirX and its directors, Nischal Shetty and Sameer Hanuman Mhatre.
The notice is served under Foreign Exchange Management Act, 1999, (FEMA) as cryptocurrencies worth Rs. 2,790.74 crore are under suspicion. WazirX allows users to trade in digital currencies like Bitcoin, Ethereum, and Ripple.
The platform arranges a range of transactions including exchange of CCs with rupee and vice-versa, exchange of CCs, and person to person (P2P) transactions. It also facilitates the transfer and receipt of cryptocurrency held in its pool accounts to wallets held by people outside India.
The ED stated that WazirX is not collecting the documents needed for the transactions, which is in violation of the basic mandatory Anti Money Laundering (AML). It also goes against FEMA guidelines and precaution norms designed to fight the financing of terrorism.
The ED said that WazirX clients can transfer valuable cryptocurrencies to any person regardless of their location and nationality. And these transfers are taking place without proper documentation and paper trail. None of the transactions are available for audits and investigation. This has made WazirX a safe place for money laundering and other illegitimate activities.
The investigation found that users of WazirX have received cryptocurrency worth Rs. 880 crore from Binance accounts via a pool account. The users have also transferred cryptocurrency worth Rs. 1,400 crore to Binance accounts.
The ED also added that the FEMA investigation is being launched based on another ongoing money-laundering investigation into Chinese-owned illegal online betting applications.
The Chinese applications were found to have laundered proceeds of crime worth approximately Rs 57 crore by converting the deposits in Indian currency into Crypto-currency Tether (USDT). It was then transferred to Binance (exchange registered in the Cayman Islands) Wallets. The investigation had revealed that the instructions for the transactions came from outside India.