The strange case of WazirX ownership without any stake for Binance

Even as scrutiny of its business intensifies with the raid conducted on WazirX director by the Indian Enforcement Directorate, the firm faces an embarrassing revelation that will be difficult to swallow for most people. After claiming in 2019 that Binance had bought the firm, now it turns out that the deal never happened. A fact that WazirX or Binance for that matter did not care to share with anyone until now.

It has taken Enforcement Directorate (ED) raids and the threat of what they might spill for Binance CEO Changpeng Zhao to announce now that the 2019 deal was never really consummated. 

The (ED), which has wide-ranging powers for criminal prosecution of offenders, has also frozen bank account/s of WazirX directors to the tune of Rs 64.67 crores.

“Binance does NOT have control on operations including user sign-up, KYC, trading and initiating withdrawals, as stated earlier. WazirX's founding team controls that. This was never transferred, despite our requests. The deal was never closed. No share xfers,” said Zhao on Twitter. Binance also updated its 2019 blog yesterday to say that the agreement was to purchase certain assets and intellectual property of WazirX.

In a Twitter thread, Shetty seemed to indicate that the brand and domain WazirX was acquired by Binance, not the holding firm. “Zanmai Labs is an Indian entity owned by me & my co-founders. Zanmai Labs has a license from Binance to operate INR-Crypto pairs in WazirX. Binance operates crypto to crypto pairs, processes crypto withdrawal..,” said Shetty. He further added that Binance owns the WazirX domain name and it has root access to AWS servers. Technically, that would give Binance not only unfettered access to WazirX data, but also allow it to shut down the exchange if it believed that would serve its interests. Zhao claims they have held off from such a drastic step as it would hurt ‘users’.

In the haze around the ownership of WazirX, its entities and IPs, Entrackr has dug through WazirX entities and their regulatory filings in India and Singapore to ascertain the legal status quo in terms of ownership. In the Indian entity, registered under the name of Zanmai Labs Private Limited, there are two shareholders: Zettai Pte Ltd and Nischal Shetty. Zettai Pte Ltd is the holding company of WazirX in Singapore and owns 99% stake in the Indian entity while the remaining 1% is owned by Nischal Shetty.

Further, in the Singapore-based Zettai Pte Ltd (WazirX), the company has 3 stakeholders: Nischal Shetty with 74.27%, Sameer Hanuman Mhatre with 18.56% and Siddharth Menon with 7.17% stake. In other words, holding practically 100% of the firm. The trio are co-founders of WazirX.

The filings also reflect that WazirX had provided an exit to its early backer Kalaari Capital. This can be seen on Kalaari’s website.

Thus, there is zero legal documentation in the public domain of any sort of holding for Binance in the firm. Even as it seemingly controls or can control all its activities if it wishes to, thanks to access to its root servers in India. Even by the sometimes outrageous leaps of faith and imagination that many crypto claims demand, this one is quite possibly demanding a leap too far for believers.

Detailed queries sent to Shetty, WazirX’s spokesperson and Binance did not elicit any immediate response. We will update the story in case they respond.

The escalating charges and investigations into WazirX, one of the biggest names in the crypto business in India risks dealing a body blow to the already limping reputation the crypto ecosystem has been grappling with. In WazirX, besides the charges of funds diversion, investors should be worried about the ED claim that crypto assets allegedly owned by WazirX are untraceable. Any outcome that hits investors and their investments from here on, will not only take down the firm itself but will probably set back the crypto sector in India by months, if not years.