Binance-WazirX Dispute Rages as the Indian Crypto Exchange Is Told to Move Funds Out of Binance

The solution ostensibly ends worries about what would happen to customer funds if Binance and WazirX end their collaboration.

AccessTimeIconFeb 3, 2023 at 11:29 a.m. UTC
Updated May 9, 2023 at 4:07 a.m. UTC
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Binance has invited Zanmai Labs, the entity operating Indian crypto exchange WazirX, to work out arrangements to withdraw any remaining assets held in Binance wallets, according to a blog post on Friday.

The solution ostensibly ends worries about what would happen to customer funds if Binance and WazirX end their collaboration, but seems to have further escalated the fight between the two crypto exchanges.

"As an exception, we have invited Zanmai to work out arrangements with us to withdraw any remaining assets in the relevant accounts after [Feb. 3]. However, the responsibility ultimately lies with the Zanmai team to make the withdrawals expeditiously," Binance said.

In a tweet on Friday at 14:58 UTC, WazirX said it had begun the process of transferring assets to multi-sig wallets, and that it expects the process to be completed "within the next few hours."

History of Binance-WazirX spat

The public spat between Binance and WazirX began on Aug. 5, 2022, when Binance CEO Changpeng Zhao tweeted claims that "Binance does not own any shares in Zanmai Labs, the entity operating WazirX and established by the original founders." Zhao's comments had come hours after India's Enforcement Directorate (ED) raided the properties of WazirX director and co-founder Sammer Mhatre on the same day on suspicions that the exchange had helped 16 fintech companies launder money.

In the days to follow, Zhao stirred panic among users of WazirX. Zhao said Binance could, if it wanted to, shut down the Indian cryptocurrency platform, and advised its users to transfers their funds to Binance.

"Binance provides wallet services for WazirX. WazirX domain is transferred to our control. We were given a shared access to an AWS account. We could shut down WazirX. But we can't, because it hurts users," Zhao tweeted.

"If you have funds on WazirX, you should transfer it to Binance. Simple as that," he said.

In an interview with CoinDesk at the time, Nischal Shetty, the co-founder of WazirX, rebuffed Zhao's claims about not controlling the WazirX exchange. "WazirX is the technology which we sold to Binance,” he said. He has legal documents proving the sale but is unable to share them, again due to legal reasons. “What I really want is a solution,” Shetty said.

Shetty had spoken to CoinDesk over the past few months, saying his team has been in discussions with Binance for several months to work out the ownership issue.

In the months to come, macro economic factors coupled with India's harsh taxes and the crypto contagion exacerbated by the FTX collapse saw WazirX laying off 40% of its workers. Given that WazirX later disclosed that 90% of its user assets are held in Binance wallets, it was unclear what impact Binance and WazirX decoupling would have on WazirX.

Binance’s threat and exception

The solution appears to have come after a threat by Binance, which CoinDesk reported on last week based on emails it had seen.

"On 26 January 2023, we offered Zanmai a choice between retracting the false public statements (and continuing to use our services) or terminating the use of our wallet service," said the Binance blog. "Since Zanmai has refused to clarify their misleading statements, Zanmai has till 3 February 2023 (23:59 UTC) to remove the funds from the accounts that they used for WazirX’s operations."

The blog further said that since the "deadline is near" and "users whose assets are deposited with WazirX might have legitimate concerns about what will happen to their holdings in light of these events," Binance said.

It added it made an exception: "Zanmai have informed us of their intention to withdraw the assets from the relevant accounts. On our end, we are doing everything we can to facilitate this process."

WazirX did not immediately respond to CoinDesk's request for comment.

UPDATE (Feb. 3, 11:30 UTC): Adds comment disclosure.

UPDATE (Feb. 3, 12:20 UTC): Updates headline and adds details throughout and context.

UPDATE (Feb. 3, 16:27 UTC): Adds Friday tweet from WazirX.


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Amitoj Singh

Amitoj Singh is CoinDesk's regulatory reporter covering India. He holds BTC and ETH below CoinDesk's disclosure threshold of $1,000.

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