WazirX vs. Binance: Is Binance fooling Indians ?

What is WazirX?

WazirX is India’s largest crypto trading platform that started operations in 2017. It is India’s largest and fast-growing cryptocurrency exchange in India, operating $8 million worth of assets in its platform before regulators put a halt to its operations.

The Connection between Binance and WazirX

In a 2019 blog post, Binance reported that it had acquired WazirX. It also stated that the acquisition would help crypto users in India to purchase cryptocurrencies using Indian Rupees (INR). Binance said this development would also enable Indians to invest in stablecoins.

WazirX vs. Binance: Is Binance fooling Indians ? 1

 Techcrunch– Binance and WazirX Representatives 

The post added that the acquisition of WazirX was part of Binance’s strategic move to establish a global presence in order to provide all global netizens with a chance to acquire and invest in cryptocurrencies in a secure, fast, and reliable manner.

Indian Regulator Gets Comes Knocking

On 3 August 2022, India’s Enforcement Directorate (ED), a government body responsible for investigating money laundering and violations of foreign exchange laws, froze WazirX’s bank accounts with over $8 million in assets. That action is part of its anti-money laundering (AML) investigation process as it accuses WazirX of facilitating money laundering.

The ED claimed that several crypto organizations and Fintech companies have been diverting funds purportedly for purchasing cryptocurrencies and other digital assets through WazirX. However, such companies ended up externalizing the funds.

The ED alleged that WazirX failed to cooperate since it did not divulge the activities of suspected Fintech companies that were WazirX’s users. Hence, WazirX was deemed to be evading regulatory oversight. The dilly-dallying and delayed cooperation on the part of WazirX forced the ED to search WazirX’s information depositories.

Also, the ED reported that one of WazirX’s directors, Mr. Sameer Mhatre, had access to the company’s databases but failed to give accurate information pertaining to the financial transactions of the Fintech companies in question.

Commenting on freezing WazirX’s assets, the ED said, “By encouraging obscurity and having lax AML norms, it [WazirX] has actively assisted around 16 accused Fintech companies in laundering the proceeds of crime using the crypto route. Therefore, equivalent movable assets to the extent of Rs. 64.67 crore [$8.14 million] lying with Wazirx were frozen.”

WazirX’s Version of the Story

In an interview with MoneyControl, one of WazirX’s shareholders explained that Binance and WazirX agreed upon an acquisition deal after an impending ban on firms or financial institutions involved in cryptocurrencies. After lifting the ban, Binance and WazirX negotiated an acquisition deal.

WazirX vs. Binance: Is Binance fooling Indians ? 2

Coindesk– WazirX CEO Nischal Shetty 

Commenting on this, Shetty said, “That is when they [Binance] suggested, and we obliged that we use an entity we own and we get a license from them for processing rupee deposits and withdrawals.”  He added, “That is how Zanmai got the license for WazirX from Binance, and you can only give a license if you own it. That is proof they had acquired WazirX.”

The critical claim that one can give a license only if one bears ownership as well is under contention and unproven.

Shetty also divulged that Binance is responsible for all the deposits and withdrawals of cryptocurrency at WazirX. According to him, the terms and conditions of the agreement are on the website. He confirmed that WazirX is a brand of Binance up to now. He also highlighted, “We have a proper legal document of acquisition and a license to operate the rupee market in India. It is just that we can’t share it at this stage.”

Binance’s Version of the Story

According to Binance, WazirX continued operating as a separate legal entity under the control and management of Zanmai Labs.

Tweet War!

WazirX vs. Binance: Is Binance fooling Indians ? 3

                     Twitter– Binance says WazirX is its entity 

WazirX vs. Binance: Is Binance fooling Indians ? 4

                   Twitter– Shetty Confirms that Binance Acquired Wazirx

WazirX vs. Binance: Is Binance fooling Indians ? 5

Twitter: Binance refutes ownership of WazirX

In his tweets, Zhao said that Binance is not a shareholder in WazirX. Instead, it only offers its wallet services to the company. On the contrary, Shetty claimed that “Binance owns the WazirX domain name, has root access to AWS servers, and has all the crypto assets.”  In one of his tweets, Zhao said the acquisition deal with WazirX was not completed.

But all of this is irrelevant:

Don’t be Fooled by Narratives; It’s Driven by Incentives

Neither of the parties, Binance or WazirX, has provided concrete proof of their claims relating to the ownership of WazirX. Both parties seem to be trying to shirk ownership of WazirX to avoid legal repercussions with the Indian government and to avoid losing its reputation in India, considering that the country has over 100 million crypto users. Note that India has the second most crypto owners in the world after the United States.

What is the Truth?

Firstly, it has to be understood that regardless of what people say, there are only a few valid sources of truth in these legal contexts. That is not found in the Twitter posts, media articles, interviews, or opinion pieces. Rather, it is the company’s official filings.

Entrackr, an Indian internet news media platform, did some due diligence on WazirX’s ownership. It concluded that WazirX is registered in both India and Singapore. In India, the company is registered under Zanmai Labs Private Limited, with two shareholders; Zettai Pte Ltd and Nischal Shetty. Zettai Pte Ltd is WazirX’s holding company in Singapore, owning a 99% stake in the Indian registered entity. This leaves Nischal Shetty with a 1% stake.

WazirX vs. Binance: Is Binance fooling Indians ? 6

Entrackr’s Shareholdings Due Diligence

In Singapore, Zettai Pte Ltd has three individuals; Nischal Shetty, Sameer Hanuman Mhatre, and Siddharth Menon, who collectively own the entire company.

This is so far in favor of Binance since zero connection with Binance owning either WazirX or Zanmai Labs was found.

References

https://news.bitcoin.com/india-freezes-crypto-exchange-wazirxs-bank-assets-binance-claims-acquisition-of-wazirx-was-never-completed/
https://www.indiatoday.in/cryptocurrency/story/wazirx-vs-binance-ownership-spat-leaves-its-users-confused-1985150-2022-08-08 
https://economictimes.indiatimes.com/tech/startups/wazirx-founder-nischal-shetty-says-binance-has-control-over-the-indian-crypto-exchange/articleshow/93394630.cms 
https://www.moneycontrol.com/news/business/cryptocurrency/what-the-wazirx-binance-rift-is-and-what-it-means-for-indian-crypto-investors-8977821.html 
https://www.reuters.com/world/india/india-investigates-binance-unit-crypto-transactions-violating-fx-rules-2021-06-11/ 
https://in.investing.com/news/crypto-firm-binance-says-it-doesnt-own-indias-wazirx-after-ed-raids-3302340 
https://techcrunch.com/2022/08/08/binance-tells-estranged-partner-wazirx-customers-to-move-funds-to-discontinue-off-chain-transfer/ 
https://www.moneycontrol.com/news/business/cryptocurrency/binance-wazirx-spat-opaque-ownership-a-hazy-acquisition-deal-and-off-chain-transactions-8985281.html 
https://triple-a.io/crypto-ownership-data/ 
https://www.thetokendispatch.com/binance-claims-acquisition-of-wazirx-was-never-completed-founders-refute-claims/ 
https://entrackr.com/2022/08/the-strange-case-of-wazirx-ownership-without-any-stake-for-binance/    

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