The Indian Directorate of Enforcement has frozen $8.1m of funds connected to cryptocurrency exchange WazirX.
The regulator is looking into fraud charges and accusations of the firm violating the Reserve Bank of India’s policies.
On Friday, the Directorate of Enforcement said in a public statement that WazirX had helped with transactions by unnamed fintech companies.
The exchange helped said companies purchase cryptocurrencies and launder them abroad, the statement read.
According to the regulator, the unnamed entities were Chinese-backed firms which had used WazirX to sidestep India’s existing crypto regulation and laws to their own benefit.
As a result, WazirX is currently having its bank account searched for information that can back the regulator’s suspicions, and possibly lead to further legal response against the platform.
The watchdog also said that it had given the cryptocurrency exchange the opportunity to step up and provide the information willingly.
“Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech APP companies and reveal the KYC of the wallets”, the regulator’s statement read.
The regulator added that WazirX intentionally promoted obscurity and maintained lax AML norms that were against the existing cryptocurrency laws in the country.
Meanwhile, Binance CEO Changpeng Zhao commented on Friday that his company did not own any equity in Zanmai Labs, which is the entity operating WazirX.
The chief executive felt compelled to offer this clarification as Binance provides wallet services for WazirX, strictly as a tech B2B solution, according to CZ.
Regulation in the cryptocurrency sector in India has been under a lot of stress with the country reneging on several promises to pass more clear-cut laws. Regardless, authorities continue to act against crypto firms.
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