India's Enforcement Directorate (ED) has raided properties related to Sameer Mhatre, a director of WazirX, a trading platform that is based in Mumbai.
The Indian agency is investigating several fintech companies over alleged fraud on instant loan apps, which are apps that make short-term loans.
WazirX "actively assisted around 16 accused fintech companies in laundering the proceeds of crime using the crypto route," the ED said in a press release. As a result, the government has frozen $8.1 million in funds held by WazirX.
Mhatre hasn't cooperated with authorities, the ED said, noting that he failed to disclose details of a transaction in March that involved the purchase of cryptocurrencies with proceeds that were gained from alleged fraud on instant loan apps.
According to the ED, various fintech companies backed by Chinese funds were unable to get authorization from India's central bank and therefore turned to the crypto route.
On Tuesday, India's Ministry of Finance announced that it was investigating two cases against WazirX under the Foreign Exchange Management Act (FEMA), with allegations that WazirX used the Binance crypto exchange to disguise transactions.
“It has been found that all crypto transactions between these two exchanges were not even being recorded on the blockchains and were thus cloaked in mystery," the ministry added, according to business news site Moneycontrol.
One of the cases dates back to 2021, when the ED first issued a FEMA notice over cryptocurrency transactions worth $382 million.
WazirX didn't immediately respond to a request for comment.
Meanwhile, going on Twitter after the news hit, Binance CEO Changpeng 'CZ' Zhao denied suggestions that Binance owns WazirX.
"Binance does not own any shares in Zanmai Labs, the entity operating WazirX and established by the original founders," Zhao said.
Referring to a still-live blog post on the Binance website announcing the exchange's acquisition of WazirX, Zhao said that deal was never completed.
"Binance has never – at any point – owned any shares of Zanmai Labs, the entity operating WazirX," he added.
Update (August 5, 17:11 UTC): Added quote from Binance CEO.
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