The ED is investigating cryptocurrency Vauld, charging it with contributing to money laundering through lax controls. The firm stated that it would seek legal advice to protect the interests of its clients, saying it follows the KYC rules of each country.
The Enforcement Directorate (ED), the Indian anti-money laundering agency, now investigates Singapore-based cryptocurrency firm Vauld.
The ED searched the Bangalore office of Vauld and froze Rs 370 crores (equivalent to around USD 46 million) worth of assets. The Indian regulator issued an order to freeze their bank and payment gateway balances.
The anti-money laundering agency has launched an investigation into several crypto asset-trading platforms. According to The Economic Times, it scrutinizes at least ten cryptocurrency exchanges for helping foreign companies launder money with crypto assets. In July, the regulator requested many cryptocurrency exchanges to submit some details and documents.
According to the agency, the accused companies laundered over Rs 1,000 crores (equivalent to around USD 130 million) with the instant loan app.
The ED said it investigated the legal entity Flipvolt-Vauld, which keeps criminal proceeds of predatory lending practices subsequently transferred overseas. The Indian regulator has charged the cryptocurrency exchange with contributing to the process through lax controls.
Vauld has stated that the ED froze its assets although it cooperated with the regulator. The agency has frozen around USD 25 million worth of crypto assets in the wallets in the group.
The cryptocurrency exchange disagreed with the freeze order, as a client had availed himself of its services. However, the ED decided to deactivate that account afterward.
The Next Step the Vauld Would Take
Vauld said it would seek legal advice to ensure protecting the interests of its clients and the firm. The cryptocurrency exchange said it followed the KYC rules of each country and stated that it would continue collaborating with the ED.
According to an ED report, the agency cannot locate those promoting the company. They found that some Chinese citizens have created cover entities and opened new bank accounts in the name of fictitious directors. The suspects seem to have left India almost two years ago.
Chinese Loan Apps Report Cases of Money-Laundering Recipients
Twenty-three predatory FinTech and non-bank organizations have reportedly used Vauld under Flipvolt Technologies to deposit millions in wallets. Likewise, WazirX had allegedly helped 16 FinTech companies use the cryptocurrency channel to launder criminal proceeds from illicit loan applications.
The ED said that the know-your-customer regulations of the Indian branch of Vauld are very lax. They also mentioned no enhanced due diligence (EDD) mechanisms, no control over the sources of funds, or mechanism to collect suspicious transaction reports.
The agency recently searched many locations of Yellow Tune Technologies Private Limited to identify their recipient wallets. However, the ED said it was impossible to trace those promoting the exchange. Chinese citizens Alex and Kaidi, whose real name is still unknown, turned out to have incorporated that fictional entity.
By Alexander Salazar