Indian Law Enforcement Agency Freezes Local Exchange's Assets Amid Clash With Binance

The Directorate of Enforcement (ED), the law enforcement and economic intelligence agency of India, has frozen the bank accounts containing assets of the Indian crypto exchange WazirX worth over 646.70 million rupees ($8.16 million).

In an Aug. 5 statement, the ED said it is investigating violations of foreign exchange policies by WazirX.

"We have been fully cooperating with the Enforcement Directorate for several days and have responded to all their queries fully and transparently," a spokesperson for WazirX, which ranks among the biggest crypto exchanges in the South Asian country, told Reuters.

The exchange said that it is not guilty of the charges imposed by the ED. "We do not agree with the allegations in the ED press release. We are evaluating our further plan of action."

The agency is investigating WazirX's alleged role in assisting instant loan app firms launder proceeds of crime through the exchange. The ED pointed out in its statement that the local exchange has been giving "contradictory & ambiguous answers to evade oversight by Indian regulatory agencies."

According to the ED, Nischal Shetty, the Managing Director of the exchange, earlier claimed that WazirX is an Indian exchange "which controls all the crypto-crypto & inr-crypto transactions and only has an IP & preferential agreement with Binance." However, Zanmai Labs Pvt Ltd, the owner of WazirX, claims that "they are involved in only inr-crypto transactions, and all the other transactions are done by Binance on WazirX."

"Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech APP companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also," the ED stated, adding that WazirX informed it that prior to July 2020, it did not record transactions on the exchange.

Commenting on ED's statement and WazirX's claims, Changpeng Zhao, the CEO of Binance - the world's biggest crypto exchange - stated last week that they had asked "for transferring of WazirX system source code, deployment, operations, as recently as Feb this year. This was refused by WazirX. Binance do NOT have control on their systems."

"WazirX has been uncooperative with us, and looks like uncooperative with ED as well," Zhao said.

A few hours later, Shetty took to Twitter to add that Binance and WazirX's deal required the sale of WazirX Technology (IP) which was then licensed to Zanmai by Binance for INR market.

"Binance operates crypto-crypto trading, crypto deposit/withdrawals. Zanmai operates INR-Crypto trading, INR deposit/withdrawal," Shetty stated.

Shetty said that WazirX has been cooperating with the ED and has submitted all the required data as well.