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"Cut ties? Binance's Indian platform WazirX accused of money laundering by authorities, Zhao Changpeng: The acquisition deal was never completed."

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"Cut ties? Binance

The Indian financial crime fighting agency on 8/5 claimed in an official document that assets worth 646.7 crore Indian Rupees, approximately $8.16 million, of WazirX have been frozen due to alleged money laundering and violation of foreign exchange regulations. WazirX, which was perceived to have been acquired by Binance in 2019, saw its CEO, Nischal Shetty, tweeting shortly after the incident that the acquisition was never completed and Binance only provided technical support to offer wallet services for WazirX.

Binance and WazirX Give Conflicting Statements

According to the Indian law enforcement agency Directorate of Enforcement, ED document and previous reports, it accuses WazirX of being involved in money laundering through an instant loan app company called Instant Loan APP, converting it into cryptocurrency and laundering it through the exchange. Other accusations include:

1. WazirX is owned by Zanmai Labs, which, along with Crowdfire, Binance, and Zettai, created a network of agreements to conceal WazirX's ownership.

2. WazirX CEO Nischal Shetty initially claimed to control all cryptocurrency transactions on the platform, only signing an intellectual property agreement with Binance, then later stated they were only involved in INR/crypto trades, with all others being done by Binance on WazirX. The conflicting responses from both parties were to evade Indian regulations.

3. All WazirX employees work remotely, with only two registered seats at a shared Wework office; while Binance handles all cryptocurrency transactions, similarly having no office and rarely responding to regulatory inquiries via [email protected].

4. Despite multiple opportunities given by authorities, WazirX did not provide KYC data of the loan app company, suspicious cryptocurrency transactions, most of which were not recorded on the blockchain and hence not traceable through blockchain.

5. Prior to July 2020, WazirX did not even record relevant banking flows, lacked KYC, Enhanced Due Diligence (EDD), and did not submit Suspicious Transaction Reports (STR).

6. Under the loose regulation cooperation between WazirX and Binance, they actively assisted 16 financial companies in laundering illicit proceeds.

Subsequent clarifications by WazirX CEO Nischal Shetty and Binance CEO Changpeng Zhao (CZ) on Twitter further complicate the situation.

CZ's Statement

CZ stated on Twitter that on November 21, 2019, Binance announced the acquisition of WazirX, a transaction that was never completed. Zanmai Labs operates WazirX, and Binance has never owned any shares in the former, only providing wallet technology support and off-chain transactions, while WazirX is responsible for all aspects of the platform, including registration, KYC, trades, deposits, and withdrawals.

The accusations against WazirX have drawn high attention from Binance, and we are willing to cooperate with the Indian law enforcement agencies and global regulatory authorities.

WazirX CEO's Statement

Nischal Shetty presented the following points:

  • WazirX has been acquired by Binance.
  • Zanmai Labs is an Indian entity jointly owned by me and a co-founder.
  • Zanmai Labs operates INR/crypto trades under Binance's permission.
  • Binance handles all cryptocurrency pairs and crypto deposits/withdrawals.

Nischal Shetty emphasized that he spoke the "truth":

  • Binance owns the WazirX domain.
  • Binance has AWS server access.
  • Binance controls the platform's crypto assets.
  • Binance controls the platform's trading profits.

CZ continues to clarify, stating in a tweet that they have been trying to complete the transaction for the past few years, but there are several issues preventing it, which he cannot disclose. In response to Nischal Shetty's statements, CZ expressed regret about debating these matters on Twitter:

Binance provides wallet services for WazirX, we have the WazirX domain, AWS permissions, we can shut down WazirX, but we cannot harm users. Binance does not control user registrations, KYC, trades, withdrawals, etc., the WazirX team has always been in charge of platform operations. Although Binance made requests, this transaction has never been completed. We are willing to cooperate with authorities, but we cannot provide user data, KYC, and other information.

However, what confuses the crypto community is that Binance seems to have always presented their relationship with WazirX as a "completed acquisition" to the public, including the initial acquisition press release on their website, and even last year when CZ mentioned WazirX as "Binance-owned" on Twitter.