In an article posted by Binance
yesterday, the crypto exchange announced that, effective from 11 August, it will be ceasing the off-chain fund transfer process between Binance and Wazirx that allowed users to transfer cryptocurrency directly between the two exchanges without incurring any transfer fee since the transfers were processed internally and off-chain.
This move comes after India's Enforcement Directorate (ED), the law enforcement agency responsible for investigating financial crimes, launched a probe into WazirX on Friday for allegedly playing a major part in money laundering linked to Chinese loan apps that were involved in digital lending in India. India's Minister of State for Finance, Pankaj Chaudhary, claimed that WazirX transactions were taking place "off-chain" while using the walled infrastructure of Binance which resulted in ED also freezing bank balances worth 647 million INR (around $8 million) belonging to WazirX as part of the investigation.
The Enforcement Directorate said that it conducted raids against Sameer Mhatre, a director of Zanmai Lab Pvt Ltd, the parent company who owns WazirX, on August 3 as he was "non-cooperative" about information requested by it. The agency also reported findings that a number of fintech companies involved in "predatory lending" through mobile apps in the country had been sending most of their funds to the crypto exchange and converting them into crypto-assets which were then sent to unknown foreign wallets.
The investigation also led to a debate between WazirX founder Nischal Shetty and Binance CEO Changpeng Zhao over who actually owns the Indian crypto exchange. A few days ago, WazirX claimed that it had been acquired and owned by Binance in 2019. However, Binance CEO Changpeng Zhao refuted the statement and said that WazirX is still operated and managed by Zanmai Labs, an Indian entity owned by Shetty and his co-founders. He also mentioned that Binance asked for transferring of WazirX system source code, deployment, operations, as recently as Feb this year which WazirX refused to provide. Binance do NOT have control on their systems.
Binance's post also included that it will continue to support Indian regulators in the ongoing matters concerning WazirX as it believes in keeping an open dialogue with regulators, policymakers and the law enforcement community. It is important to note that Binance will only be shutting down the option for WazirX users to use the "Login with Binance" option and being able to perform internal off-chain transfers between the two exchanges. Users can still deposit and withdraw balances via the standard withdrawal and deposit process between Binance and WazirX.