India’s Financial Watchdog Freezes Binance-Owned WazirX’s Assets for ‘Lax KYC Norms’

India’s chief economic enforcement agency, the Enforcement Directorate (ED), announced Friday that they have frozen $8.14 million (64.67 Crore rupees) in assets from crypto exchange WazirX.

The ED alleged that the exchange unlawfully broke currency exchange regulations. 

The Mumbai-based crypto exchange is India’s largest, with reported user figures exceeding 6 million, and over $5.3 million traded over the past 24 hours, according to data from CoinGecko. Binance acquired WazirX in 2019 in a deal reportedly valued up to $10 million. 

This week, the Directorate also conducted a physical inspection of office premises owned by one of the directors of Zanmai Labs Private Limited, WazirX’s operating company. 

The agency also reported that WazirX had engaged in activities that supported fraudulent instant-loan application services in laundering their capital through the digital assets on their exchange. 

A formal release on the matter added that Zanmai Labs and WazirX’s managing director Nischal Shetty gave “contradictory and ambiguous answers to evade oversight by Indian regulatory agencies” when asked about the true ownership of certain transactions.

“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,” the release read. 

Decrypt has contacted WazirX and has yet to hear back at publication.

WazirX’s regulatory woes

This is not the exchange’s first encounter with the Enforcement Directorate.

In an initial show-cause notice from June 2021, the ED challenged the exchange, and two of its directors, to provide sufficient documentation proving transactions concerning Chinese nationals fulfilled the statutory laws of the parliamentary Foreign Exchange Management Act (FEMA).

As for the tokens attached to both Binance (BNB) and WazirX (WRX), neither has experienced any significant drop. 

BNB compounded a healthy week of gains, with a further 3.4% increase today; WRX is sitting at break-even for the day.

The investigation into WazirX’s financial activity by the Enforcement Directorate remains ongoing.