WazirX Off Financial Watchdog’s Hook After Weeks of Investigation

• India’s Enforcement Directorate unfreezes crypto exchange WazirX’s bank accounts.
• WazirX states the investigation was regarding malicious fintech companies supposedly using WazirX.
• The relationship between WazirX and Binance remains unclear.

After weeks of having its bank account frozen by the Enforcement Directorate (ED) of India, cryptocurrency exchange WazirX has announced that its funds have now been unlocked.

The exchange announced via a blog post on its official website on September 12 that it had been cooperating with the investigators and had been providing all the necessary information that was inquired of them.

The ED was investigating 16 fintech companies and instant loan apps. Some of these alleged companies were supposedly using the exchange. WazirX noted that it had no “association” with the companies under investigation, adding that it had already flagged the accounts belonging to these firms.

According to the blog on the WazirX website:

After an in-depth internal investigation, WazirX noticed that most of the users whose information was sought by ED were already identified as suspicious by WazirX internally and were blocked in 2020-2021.

Further, WazirX said that it is conducting additional KYC/AML checks as an additional effort. “WazirX is like any other intermediary whose platform may have been misused,” the exchange added.

The ED inquiry was devastating to the Indian firm as it led Binance to virtually disown WazirX. The Binance CEO, Changpeng Zhao, stated a few hours after the ED froze WazirX accounts that the exchange did not own WazirX, despite the deal having been widely believed to have been finalized earlier in 2019.

As a result, on August 6 and 7, 2022, WazirX co-founder Nischal Shetty and Zhao got into an online argument over Twitter. Additionally, Binance has shut down the off-chain connection that allowed WazirX and Binance to send and receive funds.

The term “off-chain” refers to fund transfers that do not use the blockchain. Off-chain transactions have gained popularity because they do not incur gas fees and hence do not cost anything. As of press time, this transfer channel between WazirX and Binance remains suspended.

However, WazirX isn’t the only cryptocurrency exchange that was on the ED’s radar. Another Indian exchange, CoinSwitch Kuber, also had five of its locations raided in late August.