SUMMARY
At the beginning of 2022, cryptocurrency exchange WazirX filed a writ petition in the court
The petition sought to set aside the ED proceedings with regards to the show cause notices served to WazirX’s parent company Zanmai Labs
The ED has stepped up its investigations in cases involving money laundering through cryptocurrency this year and many Indian crypto exchanges are under its lens
The Delhi High Court has listed the hearing on crypto exchange WazirX’s plea against the Enforcement Directorate (ED) on May 2, 2023.
The cryptocurrency exchange filed a writ petition in the court at the beginning of this year seeking to set aside the ED’s proceedings with regards to the show cause notices served to its parent company, Zanmai Labs.
In June 2021, the ED served show cause notices to WazirX for allegedly violating the Foreign Exchange Management Act, 1999 (FEMA) in transactions involving cryptocurrencies worth INR 2,790.74 Cr.
“It was seen that the accused Chinese nationals had laundered proceeds of crime worth about INR 57 Cr by converting Indian Rupee (INR) deposits into cryptocurrency Tether (USDT) and then transferred it to Binance (exchange registered in the Cayman Islands) Wallets based on instructions received from abroad,” the agency said in a statement then.
The ED has stepped up its investigations in cases involving money laundering through cryptocurrency this year and many Indian crypto exchanges are under its lens. The agency found that various crypto exchanges were allegedly used as a tool to send money from India to abroad, China in particular.
The agency also froze assets worth INR 370 Cr belonging to a Bengaluru-based company and lying with Flipvolt Technologies, the Indian entity of cryptocurrency platform Vauld.
In August this year, the ED also froze WazirX’s bank assets worth INR 64.67 Cr in connection with a money laundering case involving instant loan apps. However, later in September, the exchange said that the ED unfroze its bank accounts.
It is pertinent to note that Zanmai Labs also filed a separate writ petition against the Indian government and the ED in the Karnataka High Court in June 2022, challenging the summons served by the ED under Section 37(1) and (3) of FEMA, Section 131(1) of the Income Tax Act, and Section 30 of the Code of Civil Procedure, 1908.
The ED is also conducting a separate investigation to understand the role of WazirX and Binance in alleged FEMA violations.
Wazir X was founded in 2017 by Nischal Shetty, Sameer Mhatre and Siddharth Menon. In November 2019, Binance announced acquisition of WazirX. However, after the ED froze WazirX’s accounts, Binance CEO Changpeng Zhao said that Binance never acquired the Indian crypto exchange, sparking a public spat between Shetty and Zhao on Twitter.
Later, Binance clarified in a blogpost that the 2019 acquisition was limited to an agreement to purchase certain assets and intellectual properties of WazirX.
“Binance did not purchase any equity (and does not own any equity) in Zanmai Labs, the entity operating WazirX and established by the original founders. In addition, WazirX (including the foregoing assets) continues to be operated and managed by Zanmai Labs,” it said.
