Binance is alleged to be related to the exchange investigated for money laundering, CZ denied any involvement

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2022-08-06 14:18:40

The exchange allegedly owned by Binance was investigated for money laundering, CZ denied any involvement

Binance’s Wazirx partnership announcement still appears on the homepage

The WazirX exchange is entangled in a legal trouble when it is investigated by local authorities related to money laundering. It is worth noting that the exchange is said to be owned by Binance, but CZ has denied any involvement.

On the afternoon of August 5, Reuters reported that India’s Financial Crimes Authority, the Federal Enforcement Administration (ED), has frozen the assets of the largest crypto exchange in the country – WazirX. Many sources show that this exchange was previously acquired by Binance in 2019.

The ED announced it had frozen assets worth 646.70 million rupees ($8.16 million). The agency asserted its actions were related to the investigation because of suspicions about WazirX exchange’s role in assisting instant lending app companies launder proceeds of crime by converting them into cryptocurrency on its platform.

The case involves online betting apps that are illegal in China. During the investigation, the ED found that approximately Rs 570 million worth of criminal proceeds were converted into crypto using WazirX exchange.

On the evening of August 6, Binance CEO, Changpeng Zhao, sparked controversy by claiming that “Binance has never acquired WazirX.”

Accordingly, the head of Binance admitted that he had reached an agreement to invest in Zanmai Labs, the company behind WazirX. However, the equity transfer transaction was never carried out. CZ confirmed that there is only a technical support relationship between the two sides. Binance provides a wallet service for WazirX and helps reduce transaction fees. WazirX remains in complete control of their exchange management, including user registration, KYC, and deposits.

The Binance CEO wrote that he was “concerned” about reports that authorities were investigating WazirX and how Zanmai Labs was operating the exchange, pledging to cooperate with Indian authorities on the investigation.

Immediately, Nischal Shetty, the founder of WazirX, refuted Mr. Changpeng Zhao’s statements on Twitter. Nischal said:

  • Binance acquired WazirX;
  • Zanmai Labs is an Indian company owned by me and other co-founders;
  • Zanmai Labs has licensed Binance to trade Indian rupees against crypto pairs on the WazirX platform;
  • Binance also manages crypto-crypto pairs and withdrawals;
  • Binance owns the domain name of WazirX;
  • Binance has access to WazirX’s AWS server;
  • Binance manages all crypto assets;
  • Binance holds all profits of WazirX.
WazirX CEO’s rebuttal tweet

To summarize, it can be realized that the relationship between Binance and WazirX is quite complicated:

  • In November 2019, Binance announced the acquisition of WazirX, Binance will provide a wallet platform and allow WazirX users to buy crypto with Indian rupees, as well as trade other cryptocurrencies.
  • The agreement also includes a provision to transfer management of WazirX to Binance. But according to CZ’s statement, WazirX only handed over the domain name and access to the AWS server, not letting the exchange control registration, KYC and withdrawals.
  • During this time, Binance still promoted WazirX to the public as a 100% owned platform. Changpeng Zhao also shared articles claiming WazirX as their subsidiary.
  • On August 5, 2022, WazirX was frozen by Indian authorities to investigate allegations of money laundering. The CEO of Binance stated that he does not control 100% of WazirX operations, the most important aspects are still managed by Zanmai Labs and refused to hand over to Binance for the past 3 years.

It can be seen that Binance is trying to separate and disclaim responsibility from WazirX, asserting that it has no control over user registration, KYC and withdrawals – aspects directly related to money laundering. The world’s largest cryptocurrency exchange is said to be trying to deny responsibility and blame Zanmai, the company that sold the ownership of WazirX to them citing delays in the transfer process.

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