The Enforcement Directorate has issued a show-cause notice to Mumbai-based firm WazirX for transactions involving cryptocurrency worth Rs 2,790.74 crore. Mumbai-based WazirX and directors Nischal Shetty and Sameer Hanuman Mhatre were sent the notice under Foreign Exchange Management Act (FEMA).
The agency had initiated the FEMA investigation on the basis of the money laundering probe into Chinese-owned illegal online betting applications. The ED stated that during the course of the investigation, accused Chinese nationals had laundered proceeds worth Rs 57 crore by converting the amount to cryptocurrency Tether (USDT). The same was then transferred to crypto exchange Binance.
According to ED, users of WazirX have received cryptocurrency worth Rs 880 crore and transferred out cryptocurrency worth Rs 1,400 crore to Binance accounts during the period under investigation.
"WazirX did not collect the requisite documents in clear violation of the basic mandatory Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines," said the officials. The cryptocurrency exchange allows a range of transitions including exchange of cryptocurrency with rupees and vice-versa, person-to-person transactions, and transfer to crypt held in its pool accounts to wallets of other exchanges. These wallets can be held by foreigners in foreign locations.
The officials said that none of the transactions are available on the blockchain for any audit or investigation. "It was found that the WazirX Clients could transfer 'valuable' crypto-currencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering or other illegitimate activities," added the officials.