The Enforcement Directorate (ED) on Friday issued a show-cause notice to cryptocurrency exchange WazirX (M/s Zanmai Labs Pvt Ltd) and its directors, Nischal Shetty and Sameer Hanuman Mhatre, under Foreign Exchange Management Act (FEMA), 1999 for transactions involving cryptocurrencies worth Rs 2,790.74 crore. 

According to an ED statement, it initiated FEMA investigation on the basis of the ongoing money-laundering investigation into Chinese-owned, illegal, online, betting applications. “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 the Indian rupee deposits into Cryptocurrency Tether (USDT) and then transferring the same to Binance (an exchange registered in Cayman Islands) Wallets based on instructions received from abroad,” the statement said. 

WazirX is an India-based cryptocurrency exchange which allows its customers to trade in digital currencies, such as Bitcoin, Ethereum, Ripple, etc. WazirX allows a wide range of transactions with cryptocurrencies, including exchange of cryptocurrencies with the rupee and vice versa, exchange of cryptocurrencies, person-to-person (P2P) transactions, and even transfer or receipt of cryptocurrency held in its pool accounts to wallets of other exchanges which could be held by foreigners in locations outside India. 

“WazirX does not collect the requisite documents in clear violation of the basic mandatory Anti-Money Laundering (AML) and Combating of Financing of Terrorism (CFT) precaution norms and FEMA guidelines,” the ED said in the statement. In the period under investigation, users of WazirX, via its pool account, had received incoming cryptocurrency worth Rs 880 crore from Binance accounts and transferred out cryptocurrency worth Rs 1,400 crore to Binance accounts, the statement added.