Another one bites the dust.
A few days back, it was crypto exchange Vauld suspending operations on the grounds of financial crunches.
Well, history repeated itself. This time WazirX, the crypto exchange platform, has been alleged of money laundering worth Rs.2,790 Cr.
The whistleblower body was none other than the Directorate of Enforcement (ED) which is investigating two cases related to cryptocurrency against WazirX under the provisions of the Foreign Exchange Management Act, 1999 (FEMA).
The alleged has been served a notice by the authority as well.
The Hot Plot
The concoction of the money laundering sham was brewed by Zanmai Labs-operated Wazirx, and Cayman Island-based exchange BINANCE.
WazirX was using BINANCE’s walled infrastructure. Moreover, all crypto transactions between these two exchanges were not even being recorded on the blockchains and were thus cloaked in mystery.
This allowed room for chicanery- remittance of crypto assets worth Rs.2,790 Cr were made to unknown wallets.
And that’s not all.
WazirX is among the Indian Exchanges which allow foreign users to convert one crypto into another on its own platform. They can also transfer from third-party exchanges, namely FTX, BINANCE, etc.
This international exchange and collaboration could lead to a potential regulatory arbitrage. Hence, the need for some concrete international regulations and evaluation of the risks and benefits.
First, cross-border laundering through crypto helps criminals leverage the lack of global regulation around crypto transactions to continue laundering.
Illegal funds are brought into the financial system funneled through intermediaries like exchanges, institutions, shops, and even casinos. Target exchanges with fewer compliances aid in covering trails.
Second, illegal sources of funds can be kept a secret through foreign and structured transactions. Criminals can convert one crypto asset to another and also move their digital currency across territories.
Finally, when the illegal money is washed back into the system, over-the-counter brokers (OTCs) are used in hefty money laundering.
Phew! That’s a deep, deep scam puddle!
Too long? Here’s a one-liner: ED probes crypto exchange WazirX for money laundering of Rs.2,790 Cr; says WazirX was using the walled infrastructure of BINANCE to make illicit transactions.