Mumbai: The Enforcement Directorate (ED) has issued a show cause notice to WazirX and directors Nischal Shetty and Sameer Mhatre under FEMA for transactions involving cryptocurrencies worth Rs 2790.74 crore, according to a statement on Friday.

According to the federal agency, an investigation under the Foreign Exchange Management Act, 1999, was initiated on the basis of the ongoing money-laundering probe into Chinese-owned illegal online betting applications, sources said.

“During the course of the investigation, it was seen that the accused Chinese nationals had laundered proceeds of crime worth Rs 57 crore approximately by converting INR deposits into cryptocurrency tether (USDT) and then transferring the same to Binance (exchange registered in Cayman Islands) wallets based on instructions received from abroad.”

WazirX wasn’t immediately available for comment on the matter

According to the Enforcement Directorate statement, WazirX allows a wide range of crypto transactions with cryptocurrencies, including:

  • Exchange of Crypto with INR and vice-versa
  • Exchange of cryptocurrencies
  • Person to Person (P2P) crypto transactions

WazirX also facilitated transfer/receipt of cryptocurrency held in its pool accounts to wallets of other exchanges which could be held by foreigners in foreign locations, ED said. “WazirX does not collect the requisite documents in clear violation of the basic mandatory anti-money laundering and combating of financing of terrorism precaution norms and FEMA guidelines”.

The probe has revealed that in the period under investigation, users of WazirX via its pool account received incoming cryptocurrency worth Rs 880 crore from Binance accounts and transferred out cryptocurrency worth Rs 1,400 crore to Binance accounts.

“None of these transactions are available on the blockchain for any audit/investigation. It was found that the WazirX clients could transfer ‘valuable’ cryptocurrencies to any person irrespective of its location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/other illegitimate activities,” the federal agency stated.

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