The reason for ED raid on WazirX and its directors:

As per the ED press release, the investigation agency is conducting money laundering investigation against a number of Indian NBFC companies and their fintech partners for predatory lending practices in the violation of the RBI guidelines. Various fintech companies backed by Chinese funds could not get an NBFC licence from the RBI for carrying out lending business in India, so they devised the MoU route with defunct NBFCs to piggyback on their licence and started disbursing loans through mobile apps. These Chinese fintech entities employ tele-callers who misuse personal data and use intimidatory language to extort high interest rates from loan seekers.

After the criminal investigation began, many of these Chinese Apps shut shop and diverted their funds out of India. While conducting fund trail investigation, the ED says it found large amount of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. The ED notes the maximum amount of funds were diverted to WazirX exchange and the crypto-assets so purchased have been then diverted to unknown foreign wallets.

As per the ED press release, WazirX informed that prior to July 2020, they did not even record the details of the bank account from which funds were coming into the exchange to purchase crypto assets.

The ED also states that because of the non-cooperative stand of the director of WazirX exchange, a search operation was conducted on August 3, 2022, and it was found that Sameer Mhatre has complete remote access to the database of WazirX. However, Sameer Mhatre is deliberately not providing the details of the transactions relating to the crypto assets, purchased from the proceeds of this alleged instant loan app fraud. Therefore, as equivalent movable assets, the ED has issued order to freeze the directors’ bank balances to the tune of Rs 64.67 crore.

The ED press release mentions lax KYC norms, loose regulatory control of transactions between WazirX and Binance, non-recording of transactions on blockchains to save costs, and non-recording of the KYC of the opposite wallets, ensured that WazirX is not able to give any account for the missing crypto assets.

By encouraging obscurity and having lax AML norms, WazirX has actively assisted around 16 accused fintech companies in laundering the proceeds using the crypto route, says the ED.

WazirX owners

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