WazirX founder Nischal Shetty said he has all the legal documents to prove that Binance controls all crypto-to-crypto trading and crypto deposits and withdrawals on the platform.
In an interview with Moneycontrol, Shetty said Zanmai Labs, an Indian entity that operates WazirX, is owned by him and other co-founders and has a licence from Binance for processing rupee transactions. WazirX as a product and a brand is owned by Binance, which acquired it in 2019.
Shetty said there was a banking ban in place when the acquisition took place and after the ban was lifted, an Indian entity was needed for WazirX to process rupee deposits and withdrawals.
“That is when they suggested and we obliged that we use an entity we own and we get a licence from them (Binance) for processing rupee deposits and withdrawals. That is how Zanmai got the licence for WazirX from Binance and you can only give a licence if you own it. That is proof they had acquired WazirX,” he said.
Binance cast the ownership of WazirX in doubt after the Directorate of Enforcement (ED) froze assets worth almost Rs 65 crore of cryptocurrency exchange WazirX as part of an investigation into alleged money laundering involving 16 Indian fintech companies.
However, Changpeng Zhao, chief of Binance, the world’s largest cryptocurrency exchange, has put out tweets saying it doesn’t own WazirX. In a blog post update on August 5, Binance said “the 2019 ‘acquisition’ described in this blog was limited to an agreement to purchase certain assets and intellectual property of WazirX. Binance did not purchase any equity (and does not own any equity) in Zanmai Labs.”
WazirX-Zanmai connection
Shetty said since Zanmai Labs has a licence from Binance, it is able to run the rupee crypto trading market in India. He said when a user deposits or withdraws rupees or trades the rupee market on the WazirX website, it is operated by Zanmai Labs. The crypto deposits and withdrawals are owned by Binance, he said.
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Shetty explained that since KYC (know-your-customer) is essential to deposit, withdraw and trade on WazirX, the exchange can pinpoint the identity of the person on being provided with the transaction ID. He added that whenever law enforcement sought specific data, they were provided with the data available.
Shetty said it was true that Zhao does not own Zanmai Labs. However, Binance does own WazirX, on which transactions such as rupee deposits, withdrawals, and rupee crypto trading take place. WazirX also facilitates crypto-to-crypto trading, crypto deposits, and withdrawals, he said.
“The crypto-to-crypto trading and crypto deposits and withdrawals are directly owned by Binance and you can get this information in the terms and conditions of the website. We have a proper legal document of acquisition and a licence to operate the rupee market in India. It is just that we can’t share it at this stage,” he said.
Also Read | WazirX to Binance transfer is recorded in our database, tweets Nischal Shetty
He refused to disclose the valuation at which WazirX was acquired by Binance.
Asked about Zhao’s claims that it had nothing to do with WazirX despite the legal documentation in place, Shetty said the tweets were a surprise to him because it’s been two-and-a-half years since the acquisition. He countered by asking why nothing was mentioned about ownership issues until last week.
“Look at the announcements since early 2020. Whenever anything good happened, you can see hundreds of articles talking about Binance-owned WazirX. Why was no objection raised then? We should look at hard facts. I have not changed my stand since the acquisition and you cannot be unaware and yourself sharing articles that are related to Binance-owned WazirX. Enough public data to understand what is happening,” he said.
User funds
Asked about the fate of users who deposited funds with WazirX if the accounts remain frozen for a prolonged period, Shetty said frozen does not mean that the funds are lost.
“Even for any bank, if a customer wants to withdraw everything they have on the same day, it is not possible for a bank. If a part of the assets is frozen for whatever reason, there is also going to be a timeframe for which the assets would be ideally unfrozen if there is no issue, if the entity provides all the information and any confusion is solved. Having said that, if there are Rs 100 in user funds, do you have Rs 100 worth of funds? Yes, we do,” Shetty said.
“What is more important is solvency. We are not short on money. Would there be a delay in withdrawals if too many people come in at the same time? May or may not. But this can happen to any exchange. But our deposits have not been reduced. User funds are safe with us and have not gone anywhere, it is still in the bank. We never use our user funds for any purpose,” he added.
Asked how WazirX got into the government’s crosshairs, Shetty said the exchange is the largest in the country and the most popular and therefore maybe WazirX gets the most traction. “We have been constantly cooperating with the (ED’s) investigation and will continue to cooperate,” he said, replying to another query.
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