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A major Indian cryptocurrency exchange, Wazirx, has had its bank assets of more than $8 million frozen by the Directorate of Enforcement (ED). The exchange was supposedly acquired by Binance in 2019. However, Binance CEO Changpeng Zhao (CZ) now claims that the acquisition was \u201cnever completed.\u201d Wazirx, however, maintains that it was acquired by Binance.<\/strong><\/p>\n India\u2019s Directorate of Enforcement (ED) issued<\/a> a press release Friday concerning Wazirx, a major crypto exchange in India. ED is a law enforcement and economic intelligence agency of the government of India. The announcement details:<\/p>\n Directorate of Enforcement (ED) has conducted searches on one of the directors of M\/s Zanmai Lab Pvt Ltd, which owns the popular cryptocurrency exchange Wazirx and has issued a freezing order to freeze their bank balances to the tune of INR 64.67 crore.<\/p>\n<\/blockquote>\n ED stated that this action is part of its money laundering investigation against non-bank financial companies (NBFC) and their fintech partners for \u201cpredatory lending practices in violation of the RBI [Reserve Bank of India] guidelines.\u201d<\/p>\n The announcement describes: \u201cED found that large amount of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. These companies and the virtual assets are untraceable at the moment.\u201d<\/p>\n ED alleged that Zanmai Labs created a web of agreements with Crowdfire Inc. (USA), Binance (Cayman Island), and Zettai Pte Ltd. (Singapore) \u201cto obscure the ownership of Wazirx.\u201d The authority further claimed that Wazirx gave \u201ccontradictory\u201d and \u201cambiguous\u201d answers \u201cto evade oversight by Indian regulatory agencies,\u201d noting that the exchange failed to provide crypto transactions of suspected fintech companies.<\/p>\n \u201cBecause of the non-cooperative stand of the director of Wazirx exchange, a search operation was conducted,\u201d ED stressed. \u201cIt was found that Mr. Sameer Mhatre, director of Wazirx, has complete remote access to the database of Wazirx, but despite that he is not providing the details of the transactions relating to the crypto assets, purchased from the proceeds of crime of Instant Loan APP fraud.\u201d The law enforcement agency further alleged:<\/p>\n The lax KYC norms, loose regulatory control of transactions between Wazirx & Binance, non-recording of transactions on blockchains to save costs and non-recording of the KYC of the opposite wallets has ensured that Wazirx is not able to give any account for the missing crypto assets. It has made no efforts to trace these crypto assets.<\/p>\n<\/blockquote>\n \u201cBy encouraging obscurity and having lax AML norms, it has actively assisted around 16 accused fintech companies in laundering the proceeds of crime using the crypto route. Therefore, equivalent movable assets to the extent of Rs. 64.67 crore [$8.14 million] lying with Wazirx were frozen,\u201d the ED announcement concludes.<\/p>\n Having seen media reports of his exchange being mentioned in connection with Wazirx, Binance CEO Changpeng Zhao (CZ) stated<\/a> on Twitter that his company \u201cdoes not own any equity in Zanmai Labs.\u201d<\/p>\n Zhao claimed:<\/p>\n On 21 Nov 2019, Binance published a blog post that it had \u2018acquired\u2019 Wazirx. This transaction was never completed. Binance has never \u2014 at any point \u2014 owned any shares of Zanmai Labs, the entity operating Wazirx.<\/p>\n<\/blockquote>\n \u201cBinance only provides wallet services for Wazirx as a tech solution. There is also integration using off-chain tx, to save on network fees. Wazirx is responsible all other aspects of the Wazirx exchange, including user sign-up, KYC, trading, and initiating withdrawals,\u201d CZ explained.<\/p>\n \u201cRecent allegations about the operation of Wazirx and how the platform is managed by Zanmai Labs are of deep concern to Binance. Binance collaborates with law enforcement agencies all around the world. We would be happy to work with ED in any way possible,\u201d the Binance boss emphasized.<\/p>\n CZ\u2019s clarification shocked many in the Indian crypto community since they were under the impression that Wazirx is a Binance company.<\/p>\n In an attempt to clarify the relationship between Wazirx and Binance, Wazirx founder Nischal Shetty insisted<\/a> on Twitter that his exchange was indeed acquired by Binance.<\/p>\n He added that Zanmai Labs, an entity co-owned by him, has licensed from Binance to operate INR-crypto trading pairs on Wazirx while Binance operates crypto-to-crypto pairs and processes crypto withdrawals.<\/p>\n Asking investors not to confuse Zanmai Labs and Wazirx, he revealed that Binance owns the Wazirx domain name, has root access to its AWS servers, has all the crypto assets, and receives all the crypto profits.<\/p>\n Responding to Shetty\u2019s tweets, CZ confirmed<\/a>: \u201cWe could shut down Wazirx. But we can\u2019t because it hurts users.\u201d He added that Binance does not have operational control, including \u201cuser sign-up, KYC, trading and initiating withdrawals,\u201d noting that they are controlled by Wazirx\u2019s founding team. The Binance CEO stressed: \u201cThis was never transferred, despite our requests. The deal was never closed. No share transfers.\u201d<\/p>\nED\u2019s Action Against Wazirx<\/h2>\n
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Binance\u2019s Statements on Acquisition of Wazirx<\/h2>\n
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Clarification by Wazirx\u2019s Founder, Binance\u2019s Warning<\/h2>\n
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