ED Seizes INR 1,144 Cr, Arrests 20 People In Crypto Fraud Cases

The Enforcement Directorate (ED) has seized proceeds of crime amounting to INR 1,144 Cr and arrested 20 people in cases related to cryptocurrency or virtual digital assets frauds, Minister of State for Finance Pankaj Chaudhary informed Lok Sabha on Monday.

“ED is investigating several cases related to crypto currency / virtual digital currency frauds wherein a few crypto exchanges have also been found involved in money laundering. Necessary action as per provisions of Prevention of Money Laundering Act, 2002 (PMLA) has been taken by the ED,” the minister said.

Further, assets amounting to INR 270.18 Cr have been seized under section 37A of the Foreign Exchange Management Act (FEMA).

Last year, the ED also issued a show cause notice to cryptocurrency exchange Zanmai Labs Pvt Ltd, known as WazirX, and its directors under FEMA for transactions involving cryptocurrencies worth INR 2,790.74 Cr.

It is to be noted that WazirX has been embroiled in controversies since last year when Binance’s chief executive officer (CEO) Changpeng Zhao publicly claimed that his company did not own any stake in Zanmai Labs, which operates the homegrown crypto exchange WazirX. 

“RBI has been cautioning users, holders and traders of Virtual Currencies (VCs) vide public notices on December 24, 2013, February 01, 2017 and December 05, 2017 that dealing in VCs is associated with potential economic, financial, operational, legal,  customer protection and security related risks,” Chaudhary said in a written reply to Lok Sabha.

The central bank has long been advocating a ban on cryptocurrencies. However, the Indian government hasn’t discussed implementing a comprehensive ban. Nevertheless, the Economic Survey 2022-23 emphasised the widespread influence of cryptocurrencies and urged for global regulations.

The lack of clarity on cryptocurrencies in India has also affected crypto startups with many of them shutting shops. Pillow, Flint and WeTrade are crypto startups which decided to wind down businesses over the last few months due to regulatory uncertainty.

Amid the ongoing funding winter, Sequoia Capital reportedly cut its crypto fund by more than 65% to about $200 Mn. The venture capital firm has cut down two of its venture funds, including the crypto fund, which went from $585 Mn to $200 Mn.

In the first half of 2023, India’s crypto, blockchain, and web3 ecosystem saw just three funding deals, raising approximately $30 Mn.