Binance Terminates Wallet Services For WazirX, Directs To Withdraw All Funds

In what can be called the escalation of hostilities, crypto giant Binance has terminated wallet services for Zanmai Labs, which operates the homegrown crypto exchange WazirX. In a stern statement, Binance has directed Zanmai Labs to withdraw all funds held in Binance wallets for WazirX’s operations.

“Since, Zanmai has refused to clarify their misleading statements, Zanmai has until February 3, 2023 (23:59 UTC) to remove the funds from the accounts that they used for WazirX’s operations,” Binance said in a blog post. 

The alleged misleading statements relate to the public spat between the cofounders of the two companies – Changpeng  Zhao (CZ) and Nischal Shetty – over Binance’s purported ownership of Zanmai Labs. 

The blog explicitly stated that Binance has no control over Zanmai’s management of user funds, adding that the former only provided wallet services to the latter. Binance further claimed that the provision of such a tech solution was ‘not unique’ and similar to arrangements with multiple other firms that use Binance’s infrastructure to ‘independently’ run their businesses.

Binance claims to have reached out to Zanmai Labs late last month to retract ‘the false public statements’ or terminate the use of its wallet services. Pursuant to this, Zanmai executives are said to have told Binance that the former would withdraw the assets from the relevant accounts.

“On our end, we are doing everything we can to facilitate this process. As an exception, we have invited Zanmai to work out arrangements with us to withdraw any remaining assets in the relevant accounts after February 3. However, the responsibility ultimately lies with the Zanmai team to make the withdrawals expeditiously,” Binance said. 

The Singapore-based company noted that the move would have no impact on Binance users and their funds.

“We have initiated the process of transferring assets to multi-sig wallets, which we expect to be fully completed within the next few hours. Users can continue to trade, deposit & withdraw funds as usual. Your funds are safe with us,” said a WazirX spokesperson.

The dramatic escalation comes nearly a week after WazirX cofounder Nischal Shetty refused to retract statements that Binance had purchased the homegrown crypto exchange’s parent company.

This is not the first such salvo from Binance. In August last year, the Singapore-based company had removed the off-chain fund transfer channel between the firm and WazirX.

Clash Of Titans

The fallout erupted in August last year after the Enforcement Directorate (ED) landed at the doorsteps of WazirX’s director Sameer Mhatre and raided multiple premises connected to him over allegations of money laundering. 

Hours later, Binance’s chief executive officer (CEO) Changpeng Zhao, aka CZ, publicly claimed that his company did not own any stake in Zanmai Labs. The clarification came after reports of a public announcement back in 2019, which underlined Binance’s acquisition of WazirX, started surfacing. 

What followed was a series of tweets where CZ publicly claimed that it did not own Zanmai Labs, while Shetty rebutted by saying that he had documents to prove the sale and was working out the ownership issue with Binance. Shetty also claimed that Binance owns WazirX’s domain name, root access to AWS servers, crypto assets and crypto profits.

After months of drama, the matter came to a head recently after Binance shot off a letter to WazirX, asking the Indian exchange to retract Shetty’s previous statements and erase all mentions of Binance in its terms of service. 

Retorting, Zanmai said that the demands were ‘unethical’ and attempted to use media pressure and threats to force Zanmai to issue false and misleading statements. 

WazirX has also been hit by a slew of regulatory challenges and mass layoffs, The troubled crypto exchange laid off as much as 40% of its workforce last year and has so far seen ED freezing and, subsequently, unfreezing its assets worth INR 64 Cr. 

The company is also locked in a legal tangle with the agency and has approached the Delhi High Court in a case related to the show cause notices served to its parent company, Zanmai Labs.The matter is scheduled to be heard on May 2. 

(This story has been updated to include the statement of a WazirX spokesperson)