November 28, 2023

Per a Press release by India’s Enforcement Directorate (ED), crypto exchange Binance was allegedly involved in a money laundering scheme created with WazirX. This entity operates as a crypto exchange platform in this country. One of its offices was raided on August 3rdas a result of ongoing research.

Binance CEO Changpeng Zhao has denied the allegations, stating that the company has no financial ties to WazirX and does not own any equity in Zanmai Labs. According to the announcement by the Indian authorities, the latter is the parent company of WazirX and one of the main alleged actors in the money laundering scheme.

As a result of the raid, local authorities are freezing more than $8 million or 64.67 Indian crowns (INR) in bank balances associated with WazirX. The ED alleges that some companies are allegedly running an unlicensed lending business by diverting funds in the form of cryptocurrencies to WazirX.

These funds are used to allegedly launder money in a scheme involving “unknown foreign wallets” and ghost fintech companies. The release claims:

The ED is conducting a money laundering investigation against some Indian NBFCs (Non-Banking Financial Companies) and their fintech partners for predatory lending practices in violation of RBI guidelines and using callers who misuse personal data and use abusive language to extort money interest rates from borrowers.

The investigation led authorities to question Nischal Shetty, CEO of Zanmain Labs, the company that allegedly controls WazirX. The executive claims that Binance handles the majority of transactions for WazirX.

Authorities believe the suspects were giving “contradictory and ambiguous answers” in order to obscure the investigation. Additionally, the ED believes that the cryptocurrency exchange failed to implement strong Know Your Customer (KYC) and Anti-Money Laundering (AML) policies.

Was Binance involved in this alleged money laundering scheme?

In addition, authorities reported that the parties went to great lengths to conceal transactions. The ED also questioned Sameer Mhatre, Director of WazirX, but could not gather more information about the transactions linked to the exchange platforms. Added to the release:

Lax KYC rules, lax regulatory control of transactions between WazirX & Binance, not recording transactions on Blockchains to save costs and not recording KYC of opposing wallets have ensured that WazirX is unable to give any account of the losers crypto assets. (…) By encouraging obscurity and having lax AML rules, it has actively assisted around 16 accused fintech companies in laundering the proceeds of crime using the crypto route.

Binance’s CEO clarified that the exchange announced an agreement to acquire WazirX, but that the transaction “never went through.” The executive said that their platform “only provides wallet services” and pointed out that all responsibility for the operation of the platform rests solely with WazirX.

Zhao acknowledged that the allegations against WazirX are “disturbing” and claimed that they are constantly cooperating with “law enforcement agencies around the world” and offered their assistance to the ED and Indian authorities.

The latter said they tried to communicate through Binance [email protected] contact, but the company “rarely responds to inquiries.”

At the time of writing, BNB price is trading at $313 with small gains on the 4-hour chart.

BNB price with small gains on 4-hour chart. Source: BNBUSDT Tradingview

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