Directorate of Enforcement (ED) raised concerns about such transactions.
ET first reported on August 8 that
Binance had disabled off-chain transfers with WazirX. Off-chain transfers, as the name suggests, are those that take place off the blockchain to save time and money.
“In order to provide clarity and protection for users, we are removing the off-chain fund transfer channel between WazirX and Binance. From August 11, Binance will cease to support off-chain fund transfers between WazirX and Binance via the ‘login with Binance’ option. Users will still be able to deposit and withdraw balances via the standard withdrawal and deposit process between Binance and WazirX,” said Patrick Hillman, chief communications officer, Binance.
On Friday, the ED said lax know-your-customer (KYC) norms, loose regulatory control of transactions between WazirX and Binance, not recording transactions on blockchains to save costs, and not recording KYC of the opposite wallets ensured that WazirX was “not able to give any account for the missing crypto assets”.
The ED said it had recently conducted searches on one of the directors of Zanmai Labs and
issued a freezing order on its bank accounts, which contain Rs 64.67 crore.
According to the agency, the exchange “actively” helped 16 fintech companies that are under investigation on charges of money-laundering to divert the alleged proceeds of crime using crypto. The ED said its probe revealed WazirX has an “obscure” ownership structure.
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“As a result of the recent regulatory action taken against Zanmai Labs Pvt Ltd, in relation to their operations of the WazirX Exchange, it has come to our attention that some users were given to believe that funds deposited in WazirX were managed by Binance. This is not the case,” Hillman added.
The ED said in its note on Friday that Binance was without any known office, “any known employee and rarely responds to queries on legal@binance.com”, but Hillman said that the company would co-operate with Indian regulators in the ongoing matters concerning WazirX.
“Binance believes in keeping an open dialogue with regulators, policymakers and the law enforcement community as we collectively seek to establish a global regulatory framework for the industry,” he said.
ET reported on August 8 that WazirX was
looking to allay its employees’ concerns after the ED raid, telling them it “disagrees” with the agency’s allegations.
Changpeng Zhao, founder of Binance, and Nischal Shetty, cofounder of WazirX,
have been embroiled in a war of words on Twitter since Friday over which entity controls trading operations on WazirX. This has caused confusion and chaos among the 15 million registered users of the Indian exchange.
