The Law Enforcement (ED) Directorate has investigated one of the directors of the Mumbai-based company, M/s Zanmai Lab Pvt Ltd, which owns the popular cryptocurrency exchange WazirX and issued a freezing order to freeze their bank balances to the tune of Rs. 64.67 crores for assisting the accused instant loan app companies to launder fraudulent money through the purchase and transfer of virtual crypto assets, agency officials informed Friday.
The ED is conducting a money laundering investigation against a number of Indian NBFC companies and their fintech partners for predatory lending practices in breach of RBI guidelines and using telecallers who allegedly misused personal details and used abusive language to extort high interest rates from loan takers.
“Various fintech companies backed by Chinese funds were unable to obtain NBFC license from RBI to engage in lending business, so they devised the MOU route with former NBFCs to piggyback on their license. After the criminal investigation began, many of these fintech apps shut down and siphoned off the huge profits made using the above modus operandi,” an agency official said.
While investigating the money trails, ED discovered that large amounts of funds were being diverted by fintech companies to buy crypto assets and then launder them offshore. These companies and virtual assets cannot be found at this time. “Notices have been sent to crypto exchanges. It is found that the maximum amount of funds have been diverted to the WazirX exchange and that the purchased crypto-assets have been diverted to unknown foreign wallets,” the officials said. ‘agency.
“ED investigations learned that Zanmai Labs Pvt Ltd created a network of agreements with – Crowdfire Inc. USA, Binance (Cayman Islands), Zettai Pte Ltd Singapore – to hide ownership of the crypto-exchange More Earlier, their managing director Nischal Shetty claimed that WazirX is an Indian exchange that controls all crypto-crypto and INR-crypto
transactions and only has an IP and preferential agreement with Binance. But now Zanmai claims that they are only involved in INR-crypto transactions, and all other transactions are done by Binance on WazirX. They give contradictory and ambiguous answers to escape the scrutiny of Indian regulatory agencies,” the ED said in a statement.
“WazirX is powered by cloud-based software (@AWS Mumbai), all employees work from home, the head office is a two-chair coworking Wework space, and all crypto-to-crypto transactions are controlled by Binance , which is again without any known office, any known employee and rarely responds to questions about his official email id.Despite repeated opportunities, WazirX has failed to give the crypto transactions of fintech companies APP suspicious and reveal the KYC of the wallets. Most transactions are not recorded on the blockchain as well,” the statement read.
“WazirX informed that prior to July 2020, they did not even record bank account details from which funds came into the exchange to purchase crypto assets. No physical address verification is performed. There is no verification of the source of their clients’ funds. No EDD is performed. No STRs have been raised. Due to the non-cooperative stance of the WazirX exchange manager, a search
the operation was conducted under PMLA on Wednesday and it was found that Sameer Mhatre, director of WazirX, has full remote access to WazirX’s database, but despite this, he does not provide transaction details relating to crypto assets, purchased from the proceeds of crime of Instant Loan app fraud,” the agency said in its statement.
Lax KYC standards, loose regulatory control of transactions between WazirX and Binance, non-registration of Blockchain transactions to reduce costs, and non-registration of KYC of opposing wallets have resulted in WazirX not being able to account for the missing crypto. assets. It made no effort to trace these crypto assets. By encouraging obscurity and having lax AML standards, he has actively helped around 16 accused fintech companies launder the proceeds of crime using the crypto route. Consequently, equivalent movable assets to the extent of Rs 64.67 crore belonging to WazirX have been frozen under the PMLA, the officials claimed.
(To receive our electronic document daily on WhatsApp, please click here. To receive it on Telegram, please click here. We allow sharing of the PDF of the document on WhatsApp and other social media platforms.)