ED freezes Rs 367 Cr in crypto exchange Vauld’s India accounts

The Enforcement Directorate, India’s top financial law enforcement agency, announced on Friday that it had frozen Rs 367 crore in funds managed by Singapore-based cryptocurrency exchange Vauld. The freezing comes amid a criminal investigation into a fintech lending app with Chinese links, the ED said in a press release.

Vauld has stopped deposits and withdrawals for its user base globally, and is undergoing legal proceedings in Singapore to decide next steps. The company has applied for a moratorium in a Singaporean court, and a three month moratorium was granted, according to a report from early August.

We have reached out to Vauld for comment.

The ED’s actions throw a wrench in that process, but do not affect the entirety of Vauld’s funds. The firm reportedly has $400 million in liabilities, but the government’s freeze only impacts around 11% of this figure. In any case, the freeze may impact Vauld’s ability to pay out reasonable settlements to depositors.

Yellow Tune Technologies Pvt Ltd, the fintech firm that was targeted by the ED, “was incorporated by Chinese Nationals Alex and Kaidi (real name not known) with the active connivance of willing CAs/CSs and the Bank Accounts were opened in the name of dummy Directors,” the ED said in its press release. These Chinese Nationals left India during December, 2020 and later the Bank internet credentials, Digital Signatures of dummy Directors etc., were shipped abroad and were used by the said Chinese Nationals to launder the proceeds of crime.”

The ED accused Vauld of abetting Yellow Tune’s allegedly illegal activities. “Yellow Tune by using the assistance of [Vauld] which has very lax KYC norms, no [enhanced due diligence] mechanism, no check on the source of funds of the depositor, no mechanism of raising [suspicious transaction reports], etc assisted the accused fintech companies in avoiding regular Banking channels, and managed to easily take out all the fraud money in the form of crypto assets.

The ED blamed Vauld’s ‘lax’ approach to doing due diligence on depositors for not being able to trace the assets that Yellow Tune collected. The Chinese directors of the firm have left India, the ED said. The funds managed by Vauld have been frozen under the Prevention of Money Laundering Act, 2002, while the ED investigates the case further.