ED freezes Rs 370 cr in bank accounts of crypto exchange

The officials did not disclose the name of the exchange.

This is the second instance this month when the central agency has frozen the bank accounts of a crypto exchange. In a press release last week, the ED said that it recently conducted searches on one of the directors of Zanmai Labs, which owns the popular crypto exchange WazirX, and issued an order to freeze bank balances totalling ₹64.67 crore.

The agency is probing at least ten cryptocurrency exchanges for allegedly laundering more than ₹1,000 crore identified as proceeds of crime from the firms accused in the instant loan-app case, people aware of the matter said.

Its probe has unearthed instances of the accused firms approaching the exchanges to buy crypto coins for more than ₹100 crore and sending the coins to international wallets, the people told ET on the condition of anonymity. The exchanges did not conduct any enhanced due diligence and even failed to raise suspicious transaction reports, they said.

WazirX, however, said this week that it was compliant with the KYC law. It has a no-tolerance policy towards any illegal activities, a spokesperson said.

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The accused app-based loan companies allegedly used fintech for receiving payments and for payouts, said a person aware of the matter. The profits accumulated and the balance were then routed out of the country using crypto, adding another layer to the funds, said the person.

“The trail of these proceeds of crime becomes difficult to detect, as the exchange might facilitate with the KYC but has no information on the crypto-to-crypto transfer made by the accused,” said the official.

Thousands of these instant loan application companies are under the scanner of various probe agencies, including the ED, income tax department, Ministry of Corporate Affairs and the police in various several across, according to officials. “In at least 50% of these cases, the directorship has changed hands from Indians to Chinese nationals or they have received funds from their Chinese parents,” said a senior government official.

“In the entire loan app case, crypto exchanges were the second point of failure. The money came into bank accounts first. From banks, it flowed to crypto exchanges, so it wasn’t caught at the banking level,” said an industry executive privy to the development.