Binance Execs to be Questioned Over Money Laundering by Chinese Betting Apps via WazirX

Anti-money laundering authorities in India are investigating whether Binance’s subsidiary and the largest crypto exchange in India WazirX is involved in money laundering activities linked to Chinese betting apps in the country.

The investigation is part of the ongoing probe by the  Enforcement Directorate (ED) into the Chinese betting apps which are alleged to have earned over $134 million in the past ten months.

As reported by Bloomberg, the ED has notified Binance and is awaiting a response from the exchange. 

The apps allegedly used WazirX exchange, which Binance acquired in 2019 to launder some of the funds. 

Binance: Summons Concern only WazirX

However, in response to the Bloomberg report, a spokesperson from Binance said that the exchange is yet to receive such a request from the ED regarding the investigation.

“We did not receive any summons in June or July of this year. As per available info, in the public domain, the summons were directed only to WazirX.”

WazirX was built by the techpreneur Nischal Shetty alongside co-founders Sameer Mhatre and Siddharth Menon in 2018. It was later acquired by Binance less than a year later due to its success in the country. 

The first half of 2021 has also seen the exchange grow more than 12-fold with the founders now setting their sights on making it the first billion-dollar unicorn in India. 

Online betting is legal in India, as there are no federal laws against it, with the exception of a few states that have illegalized the activity.

WazirX Plans to Decentralize into a DEX

Despite its massive growth and potential in the future, WazirX has been on the receiving end of the crypto-hostile atmosphere in India.

In mid-June, the ED asked the exchange to elaborate on Rs 2790.74 crore ($38 million) in transactions from an account allegedly linked to illegal foreign exchange activities.

At the time, the ED said that WazirX allows clients to transfer crypto anywhere without proper documentation, which makes it a safe haven for people looking to carry out illegal financial transactions.

Problems with regulatory authorities have forced the exchange to consider relocating its business into a decentralized exchange platform, according to Shetty.

“Because a DEX does not own the data, even authorities can’t really go to the developer of the exchange and say I want the data.”

Decentralized exchanges let users control their crypto funds and provide a challenge for authorities to pinpoint the owners of the data which can be openly viewed on the blockchain.

According to Matthew Chako, Partner at Price Route Legal, decentralized exchanges faces fewer risks from regulatory authorities.

“From a global perspective, decentralized exchanges are seen as less of a legal problem than centralized exchanges. India, unfortunately, does not have any of this nuance in the law.”