ED conducts raid on WazirX director; freezes assets worth Rs 64.67 Cr

Binance-owned WazirX’s woes are getting deeper as the Enforcement Directorate has conducted raids at the premises of the company’s director and frozen bank account/s to the tune of Rs 64.67 crores. The action comes two months after serving a show cause notice to the crypto exchange.

On August 4, Minister of State for Finance Pankaj Chaudhary said that the ED is investigating WazirX for alleged violation of the Foreign Exchange Management Act.

The raid and freezing of the bank account is related to the illegal transfer of money by instant loan companies [popularly known as payday loan companies] using the crypto exchange. According to media reports, ED is investigating WazirX for offering walled infra of Binance to enable transactions which weren’t recorded on the blockchain.

The WazirX tussle with regulators and law enforcement agencies is not a new thing. The company was allegedly probed for helping Chinese nationals to route $382 million through the exchange. Fearing the regulatory crackdown, WazirX’s co-founders Nischal Shetty and Siddharth Menon have also shifted their base to Dubai which has practically become a hub for web3 and crypto founders.

"We have been fully cooperating with the Enforcement Directorate(ED) for several days and have responded to all their queries fully and transparently. We do not agree with the allegations in the ED press release. We are evaluating our further plan of action," a company spokesperson said in a statement.

Acquired by Binance in 2019, WazirX is one of the largest crypto exchanges with employees in more than 70 locations. According to Binance's CEO, the company does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders. 

The recent crackdown on WazirX has come at a time when the crypto ecosystem is going through a tough time. Besides erosion in the value of most of the virtual currencies, Indian traders are facing new taxation rules while exchanges are experiencing a sharp fall in trading volume.

In July, Union finance minister Nirmala Sitharaman said that the Reserve Bank of India (RBI) wants cryptocurrencies banned in India. In the same month, the Internet and Mobile Association of India dissolved its Blockchain and Crypto Assets Council after the industry group decided that the sector was too tricky to represent alongside regulated spaces like fintech and content providers.

In April this year, the IT ministry had mandatorily ordered VPN providers and crypto exchanges to store the data of users for five years.