India’s financial crime-fighting agency said on Friday it had frozen the assets of WazirX, linked to the world’s largest digital currency exchange Binance, as part of its investigation into suspected violation of foreign exchange regulations.
The federal Enforcement Directorate (ED) said that it froze assets worth 646.70 million rupees ($8.16 million).
“We have been fully cooperating with the Enforcement Directorate for several days and have responded to all their queries fully and transparently,” said a spokesperson for WazirX, which is among the largest virtual currency exchanges in India.
“We do not agree with the allegations in the ED press release. We are evaluating our further plan of action.”
The agency said its action was related to the investigation into the crypto exchange’s suspected role in assisting instant loan app companies in laundering the proceeds of crime by converting them into cryptocurrencies on its platform.
The searches were conducted on one of the directors of Zanmai Lab, which owns WazirX.
The ED said that it was conducting money-laundering investigations against several shadow banks and their fintech companies for violation of central bank norms and indulging in predatory lending practices.
“While doing fund trail investigation, ED found that large amounts of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad…maximum amount of funds were diverted to WazirX exchange and the crypto assets so purchases have been diverted to unknown foreign wallets,” it said in a release.
A lot of these fintech companies dealing in illegal lending practices were backed by Chinese funds, the investigating agency added.
The ED launched its investigation last year into WazirX for suspected violations of foreign exchange regulations.
Binance CEO Changpeng Zhao tweeted on Friday that the company does not own shares in Zanmai Labs.
Quick thread on Binance and WazirX, and some incorrect reporting.
Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders.
— CZ 🔶 Binance (@cz_binance) August 5, 2022
“On 21 Nov 2019, Binance published a blog post that it had ‘acquired’ WazirX. This transaction was never completed. Binance has never – at any point – owned any shares of Zanmai Labs,” Zhao tweeted.
Binance only provides wallet services for WazirX as a tech solution, he said.
In 2021, the ED was looking into a money laundering case which involved Chinese-owned illegal online betting applications.
During the course of the investigation it was found that the laundered proceeds of crime worth about 570 million rupees had been converted into cryptocurrencies using the Binance platform, the ED had said.