After the Enforcement Directorate (ED) conducted raids on WazirX director last week, the world’s largest crypto exchange by volume Binance, which had announced to buy WazirX in November 2019, is now reneging on the agreement between the two companies. This prompted users to find out who controls WazirX. Now, Binance has also removed off-chain crypto transfers to crypto exchange WazirX, a popular feature among its users.
Off-chain transactions on a crypto network move the value outside of the blockchain. These are low-cost transactions and were popular among the investors on the WazirX.
Binance in a statement said, “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.”
What Are The Allegations?
A war of words is going on between WazirX founder Nischal Shetty and Binance CEO Changpeng Zhao. In November 2019, Binance through a blogpost announced that it has “acquired” WazirX. Zhao also talked about Binance’s commitment to develop the country’s crypto ecosystem and make India a global blockchain innovation centre.
Binance also said the WazirX acquisition a company strategy to increase its growing list of global partners in an effort to provide the global crypto community with easy access to cryptocurrencies in a fast and secure manner.
In another tweet on August 5 he said, “Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders.”
WazirX founder Nischal Shetty in his tweet said, “WazirX was acquired by Binance. Zanmai Labs is an India entity owned by me & my co-founders. Zanmai Labs has license frm Binance to operate INR-Crypto pairs in WazirX. Binance operates crypto to crypto pairs, processes crypto withdrawal.”
Shetty also said Binance owns WazirX domain name. Binance has root access of AWS servers. Binance has all the Crypto assets. Binance has all the crypto profits. Don’t confuse Zanmai and WazirX. “You can check this fact by going to the TOS of WazirX.”
Replying to this, Zhao said in a tweet on August 6 said, “Binance provides wallet services for WazirX. WazirX domain is transferred to our control. We were given a shared access to an AWS account. We could shutdown WazirX. But we can’t, because it hurts users.”
He added that Binance does NOT have control on operations including, “user sign-up, KYC, trading and initiating withdrawals”, as stated earlier. “WazirX’s founding team controls that. This was never transferred, despite our requests. The deal was never closed. No share xfers.”
Zhao said, “We 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.”
ED Raids On WazirX?
The ED on August 5 conducted searches on a director of Zanmai Lab, which owns cryptocurrency exchange WazirX, and frozen bank assets worth Rs 64.67 crore. The ED is conducting money laundering investigation against many Indian NBFC companies and their fintech partners for predatory lending practices.
The agency conducted raids against the director of Zanmai Lab on August 3 in Hyderabad and alleged he was “non-cooperative”. Its probe against the crypto exchange is linked to its ongoing investigation against a number of Chinese loan apps (mobile applications) working in India. The agency had charged WazirX last year for alleged contravention of the Foreign Exchange Management Act (FEMA).
“It was found that Sameer Mhatre, Director WazirX, has complete remote access to the database of WazirX, but despite that he is not providing the details of the transactions relating to the crypto assets, purchased from the proceeds of crime of instant loan app fraud… The lax KYC norms, loose regulatory control of transactions between WazirX and Binance, non-recording of transactions on block chains to save costs and non-recording of the KYC of the opposite wallets has ensured that WazirX is not able to give any account for the missing crypto assets,” the ED alleged in a statement.
WazirX was launched in 2017 and is one of India’s biggest crypto trading platforms.