Crypto trading platform WazirX said on September 12 that the Directorate of Enforcement (ED) has unfrozen its bank accounts, allowing the platform to resume banking operations after almost a month.
“After an in-depth internal investigation, WazirX noticed that most of the users whose information was sought by ED were already identified as suspicious by WazirX internally and were blocked in 2020-2021,” the crypto platform said in its blog.
The ED investigation dealt a huge blow to the Indian company, leading to US-based crypto exchange Binance virtually disowning WazirX.
A few hours after the ED froze WazirX accounts, Binance CEO Changpeng Zhao said it did not own WazirX, a deal that was understood to be completed back in 2019.
This eventually led to a Twitter spat between WazirX co-founder Nischal Shetty and Zhao on August 6 and 7. Binance also remove the off-chain fund transfer channel between WazirX and Binance. Off-chain fund transfers are transactions occurring outside the blockchain network. Due to their zero/low cost or gas fee, off-chain transactions have been popular.
“The Enforcement Directorate (ED) has been conducting investigations of 16 fintech companies and instant loan apps. Some out of them have happened to use the WazirX platform. WazirX has been cooperating with the investigators by providing them with all the necessary details, information, and documents of the alleged accused companies who used the WazirX platform,” the blog said.
Earlier this month, ED searched six Bengaluru premises of fintech companies Paytm Payment Services, Razorpay and Cashfree Payments in its crack down on Chinese loan apps, many of which are suspected of laundering money.
The rise in digital lending by unregistered and fraudulent apps has been a major concern that has had the government, the Reserve Bank of India (RBI) as well as the ED in a bind. The issue began back in 2020 when instances of high-handed loan recovery methods by these apps that lend to unsuspecting customers at high rates pushed many to suicide.
Instances of harassment, and pushing customers to die by suicide still continue to grab headlines.
The funding and origin for these apps have been traced to China and have also led to investigations by the Serious Fraud Investigation Office (SFIO), Intelligence Bureau and even R&AW. In a recent investigation, News18 reported that the apps are backed by registered fintech companies that are in turn backed by shell companies, numbering 100 in some instances. In several of these cases, hundreds of companies were found operating from a single address in Delhi-NCR and residential areas of Bengaluru.
Recently, Finance Minister Nirmala Sitharaman on September 8 chaired a meeting on illegal lending apps, with a decision being taken that the Reserve Bank of India (RBI) will prepare a 'whitelist' of all such legal applications. Further, it has also been directed that the Ministry of Electronics and Information Technology will then ensure that only these whitelisted digital lending applications are hosted on app stores.
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