Remember instant loan app stalkers? ED thinks crypto exchange WazirX helped them
In 2020, Hyderabad Police launched an investigation into illegal instant loan apps. Loan applications harassed borrowers to the point that some died by suicide. Lending apps extorted huge interest from borrowers and sometimes scammed them through blackmail and threats.
Such cases have not ceased. But the investigative agencies have found something that will shock you. The biggest question that needed to be answered in the case of the illegal activities of China’s widely backed lending apps was –
How did they transfer money in and out of India?
Now the ED has found a probable link.
The ED is reviewing at least 10 crypto exchanges due to suspicions of money laundering by instant loan apps that cross them. Specifically, it is a crypto exchange platform –
India’s leading crypto exchange WazirX is in hot waters with ED over allegedly helping 16 accused lending app operators, mostly backed by Chinese funds, launder blood money from victims outside India and on unknown foreign accounts.
The accused instant loan app companies laundered blood money through the purchase and transfer of virtual crypto assets, according to the ED.
Regarding the case, ED conducted raids on Sameer Mhatre, director of Zanmai Lab, owner of the crypto exchange. Subsequently, they tied up Rs 64.67 crore from WazirX and froze their holdings.
The reports also said that the ED froze the bank accounts of another unnamed crypto exchange with cryptocurrencies totaling Rs 370 crore.
The story does not end there.
Following the ED heat on WazirX, an embarrassing spat between its CEO Nischal Shetty and US Binance CEO Changpeng Zhao (CZ) broke out on Twitter, of all places.
Before I tell you what it was, for non-crypto followers, here’s what Nischal Shetty and Binance are –
Nischal Shetty is known as India’s crypto guru. While Binance is the largest crypto exchange in the world. In 2019, a Binance blog post revealed that the company had acquired WazirX for an undisclosed amount.
What was the spat talking about? This is where things get even murkier.
No one knows who owns WazirX. Not CEO Nischal Shetty, nor CEO of Binance CZ.
After news of the ED raid made headlines, CZ said on Twitter that Binance does NOT own WazirX. They stated that they only own the intellectual property or technology of the India-based platform.
On the other hand, WazirX CEO Nischal Shetty fired back saying that Binance owns WazirX and takes care of its operations, business practices, and transactions.
But Binance says NO, it has no access to WazirX’s data, customer information, transactions or servers.
Shetty says that Binance has ROOT (full) access to WazirX servers and they hold crypto assets.
What does it mean? This means that Binance and Nischal Shetty are trying to wash their hands of responsibility for what WazirX has done.
What does the ED say? ED says WazirX attempted to obscure its ownership by “creating a network of deals with – Crowdfire Inc. USA, Binance (Cayman Islands), Zettai Pte Ltd Singapore.”
They also said Nischal Shetty gave conflicting and ambiguous answers regarding ownership. At first, Shetty told ED that Wazir only had an IP and preferential agreement with Binance. But now Shetty and other owners claim that WazirX is involved in “INR-crypto transactions, and all other transactions are done by Binance.”
Regarding the Binance blog post about the acquisition, CZ clarified that the acquisition was never completed.
How would WazirX have helped accused lending app companies? The allegation against WazirX is that it failed to do proper KYC on its customers, which allowed the accused lending application companies to walk away without scrutiny.
KYC stands for Know-Your-Customer and by this, WazirX should know each customer’s bank account details and other information. But ED says WazirX may not even have any information on all of its customers, and their transactions aren’t even recorded on the blockchain.
The dispute between Binance and WazirX, the investigation and the ED allegations have robbed crypto investors and customers in India of their faith in the already rocky reputation of the cryptocurrency world.