Indian ED Unfreezes WazirX Bank Accounts
In an announcement published today, (September 12, 2022), WaxirX reported: "After an in-depth internal investigation, WazirX noticed that most of the users whose information was sought by ED were already identified as suspicious by WazirX internally and were blocked in 2020-2021. Due to the active cooperation extended by WazirX and active Anti-money laundering (AML) checks that led to the blocking of suspicious accounts, ED has unfrozen the bank accounts of WazirX. WazirX is now in a position to continue its banking operations as usual" [Bhat, S. Update on ED Investigation: WazirX Continues Cooperation; Bank Accounts Unfrozen. (Accessed September 12, 2022)].
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The announcement goes on to note:
The Enforcement Directorate (ED) has been conducting investigations of 16 fintech companies and Instant loan apps. Some out of them have happened to use the WazirX platform. WazirX has been cooperating with the investigators by providing them with all the necessary details, information, and documents of the alleged accused companies who used the WazirX platform [...] The company further clarified that it has no association with any of the alleged accused Fintech and Instant loan app entities which appear to be the subject of ED investigation, and is carrying out the KYC/AML checks despite having no legal obligation to do so. WazirX is like any other intermediary whose platform may have been misused.
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"Funds in WazirX bank accounts had been frozen since Aug. 5, when the ED initially announced the investigation. The locked funds amounted to over $8.1 million in total" [Fortis, S. Indian authorities unfreeze millions in locked WazirX bank accounts. (Accessed Septerber 12, 2022)].
By way of reminder, on August 5, 2022, the Indian Directorate of Enforcement (ED) issued a Press Release stating:
Directorate of Enforcement (ED) has conducted searches on one of the Directors of M/s Zanmai Lab Pvt Ltd which owns the popular Crypto-currency exchange WazirX and has issued a freezing order to freeze their Bank balances to the tune of INR 64.67 Crore. ED is conducting Money Laundering investigation against number of Indian NBFC companies & their fintech partners for predatory lending practices in violation of the RBI guidelines and by using tele-callers who misuse personal data and use abusive language to extort high interest rates from the loan takers. Various fintech companies backed by Chinese funds could not get NBFC license from RBI for carrying lending business. So they devised the MoU route with defunct NBFCs to piggyback on their license. After the criminal investigation began, many of these fintech APPs have shut shop & diverted away the huge profits earned using the above modus operandi. While doing fund trail investigation, ED found that large amount of funds were diverted by the fintech companies to purchase Crypto assets and then launder them abroad. These companies and the virtual assets are untraceable at the moment. Summons were issued to the Crypto-exchanges. It is seen that maximum amount of funds were diverted to WazirX exchange and the crypto-assets so purchased have been diverted to unknown foreign wallets.
[Directorate of Enforcement. Press Release. (Accessed August 6, 2022); See also, see also Nagoda, K. $8.1 Million in WazirX Funds Frozen in AML Investigation by Indian Authorities. (Accessed September 12, 2022).
In essence, "... the Directorate of Enforcement alleged WazirX facilitated transactions by unnamed fintech firms 'to purchase crypto assets and then launder them abroad' as part of a scheme involving Chinese-backed companies circumventing India’s licensing regulations. In its investigation, the ED said it ordered WazirX bank accounts containing 646.7 million Indian rupees — roughly $8.1 million at the time of publication — frozen and conducted a search connected to co-founder Sameer Mhatre" [Wright, T. Indian authorities freeze $8.1M in WazirX funds as part of AML investigation. (Accessed September 12, 2022).
Now "[t]he exchange, [...] said it has a no-tolerance stance towards any illegal activities on the platform. Moreover, it mentioned that many of the focused customers within the ED investigation had already been flagged as suspicious by WazirX and blocked in 2020-2021. Exchange informed that the case remains to be under investigation, but funds have been unfrozen resulting from no suspicious exercise discovered, with “no additional remark as of now” [Crypto Media Network. WazirX says Indian Authorities have unfrozen bank accounts after an investigation. (Accessed September 12, 2022)].
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