Binance says it doesn't own WazirX after ED raid

Binance does not own any equity in Zanmai Labs, the entity operating WazirX, says Changpeng Zhao, the chief executive of the world's largest crypto exchange by volume.

Zhao, better known as CZ, has been involved in a war of words with WazirX co-founder and CEO Nishcal Shetty over the ownership of the Indian crypto exchange.

This comes two and a half years after Binance announced the "acquisition" of WazirX in a blog post in November 2019. "The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthen the blockchain ecosystem in India as well as another step forward in achieving the freedom of money," CZ had said at the time.

But Zhao now claims that the deal was never closed. "Binance has never - at any point - owned any shares of Zanmai Labs, the entity operating WazirX," he says.

"Binance only provides wallet services for WazirX as a tech solution... WazirX is responsible for all other aspects of the WazirX exchange, including user sign-up, KYC, trading and initiating withdrawals," CZ says in a Twitter thread.

On Saturday, Zhao urged WazirX users to transfer their funds to Binance. "We could disable WazirX wallets on a tech level, but we can't/won't do that," says Zhao.

The Twitter spat follows the Enforcement Directorate (ED) raid on Zanmai Labs over the loan app fraud case. The probe agency conducted searches on one of the directors of Zanmai and issued an order to freeze bank balances to the tune of ₹64.67 crore.

During the investigation, it is observed that Zanmai Labs created a web of agreements with Crowdfire Inc. USA, Binance (Cayman Islands) and Zettai Pte Ltd Singapore to obscure the ownership of the crypto exchange, the probe agency says.

"Earlier, their managing director Nischal Shetty had claimed that WazirX is an Indian Exchange which controls all the crypto-crypto and INR-crypto transactions and only has an IP and preferential agreement with Binance. But now, Zanmai claims that they are involved in only INR-crypto transactions, and all the other transactions are done by Binance on WazirX," ED says, adding that WazirX is giving contradictory and ambiguous answers to evade oversight by Indian regulatory agencies.

ED found that large amounts of funds were diverted by the fintech companies to purchase crypto assets and then launder them abroad. The maximum funds were diverted to the WazirX exchange and the crypto-assets purchased have been diverted to unknown foreign wallets, says the probe agency.

All WazirX employees work from home, the registered office is a 2-chair co-working WeWork space, and all crypto-crypto transactions are controlled by Binance, which is again without any known office, any known employee and rarely responds to queries, says the ED.

WazirX failed to give the crypto transactions of the suspect fintech app companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also, it adds.

Zhao, however, claims the WazirX founding team maintained control of the operations of the platform. Binance never got the data or control of users, KYC, etc., he says, adding the company would love to work with the ED to fix these issues.