Regulator probes 10 cryptocurrency exchanges in Rs 1,370 Crore laundering cases

*The Enforcement Directorate has disclosed the affected crypto exchanges purportedly laundered over Rs 1,000 Crore, identified as proceeds of crime from firms under investigation in the Chinese instant loan app case

Isola Moses | ConsumerConnect

For alleged infractions in failure to conduct ‘enhanced’ due diligence and raise suspicious transaction reports, and lax anti-money-laundering norms, India’s Enforcement Directorate (ED) is probing about 10 cryptocurrency exchanges.

It was learnt the affected crypto exchanges purportedly laundered over Rs 1,000 Crore, identified as proceeds of crime from firms under investigation in the Chinese instant loan app case.

Sources indicated that the probe had unearthed instances of the accused firms approaching the exchanges to buy crypto coins for more than Rs 100 Crore and crypto coins being sent to international wallets.

The exchanges did not conduct any enhanced due diligence and even failed to raise suspicious transaction reports (STRs), sources stated.

Meanwhile, the regulatory ED is expected to question officials of the crypto exchanges under investigation again next week, said an industry executive.

Another source was quoted to have said that in several cases, Know-Your-Customer (KYC) details the affected crypto exchanges had collected were found to be dubious.

The source said instead, “they were traced to some persons living in remote areas or a tier-2 or tier-3 town, having no connection with the transactions.”

Crypto assets held in Vauld’s India entity attached

In a related development, the Enforcement Directorate Friday, August 12, 2022, said it had attached Rs 370 crore in assets of a Bengaluru-based company linked to the instant loan app case.

The assets were parked in bank and payment gateway balances and crypto wallets on Flipvolt, the Indian arm of Singaporean crypto exchange Vauld.

The ED also noted that it had conducted searches at several premises linked to the company, Yellow Tune Technologies Pvt Limited, over three days starting August 8, report said.

Vauld suspended all deposits and withdrawals on its platform June this year, following the collapse of the terraUSD stablecoin and its sister token Luna.

Subsequently, Vauld July, signed an indicative term sheet to be fully acquired by another Nexo, another crypto lender, pending due diligence, according to report.

The ED further disclosed that Yellow Tune was a shell company with Chinese nationals on its board, and that funds to the tune of Rs 370 crore were deposited by 23 entities, including accused non-banking financial companies (NBFCs) and their FinTech arms into Yellow Tune’s Indian Rupee wallets.

The country’s market regulator stated: “By encouraging obscurity and having lax anti-money-laundering norms, [Flipvolt] has actively assisted Yellow Tune in laundering the proceeds of crime worth Rs 370 crore using the crypto route.

“Therefore, equivalent movable assets to the extent of Rs 367.67 crore lying with Flipvolt in the form of bank and payment gateway balances worth Rs 164.4 crore and crypto assets lying in their pool accounts worth Rs 203.26 crore, are frozen.”

It was also gathered that would be the second time in August 2022 the ED has frozen the bank assets of a crypto exchange.

Last Friday, it said it had recently conducted searches against a director of Zanmai Labs, which owns the popular crypto exchange WazirX, and issued an order to freeze its bank assets totalling Rs 64.67 crore.