Vauld's Crypto and Bank Assets Worth INR 370 Crore Frozen by ED
The
Enforcement Directorate (ED) of India has frozen crypto exchange Vauld’s crypto
and bank assets to the tune of INR 370 crore (USD 46,439,181). Vauld stopped
deposits and withdrawals last month. The Indian law enforcement agency is
reportedly investigating more than ten cryptocurrency exchanges.
The ED Freezes Assets of Another Cryptocurrency Exchange
The
Enforcement Directorate (ED), the law enforcement and economic intelligence
agency of the Government of India have frozen the assets of another cryptocurrency exchange.
The
agency announced on Friday that it has conducted raids at various
premises of Yellow Tune Technologies in Bangalore and has issued an order to
freeze its bank balances, payment gateway balances, and crypto balances of
Flipvolt Technologies’ crypto exchange, totaling INR 370 crore (USD 46,439,181)
worth of assets. Flipvolt Technologies is the India-registered entity of
Singapore-headquartered Vauld, a cryptocurrency trading, borrowing, and lending
platform.
ED explained
that approximately INR 370 crore was deposited by 23 entities into the INR
wallets of Yellow Tune Technologies held by Flipvolt Technologies’ crypto
exchange. These amounts were "proceeds of crime derived from predatory
lending practices." Furthermore, it said,
"Yellow
Tune, by using the assistance of Flipvolt crypto exchange... assisted the accused
fintech companies in avoiding regular banking channels, and managed to easily
take out all the fraud money in the form of crypto assets."
The agency
alleged that Flipvolt "has very lax KYC (know-your-customer) norms, no EDD
(enhanced due diligence) mechanism, no check on the source of funds of the
depositor, and no mechanism for raising STRs (suspicious transaction
reports)."
In addition,
Flipvolt failed to give the complete trail of crypto transactions made by
Yellow Tune Technologies and could not supply any form of KYC for the opposite
party wallets, ED said.
It concluded
that "by encouraging obscurity and having lax AML (anti-money laundering)
norms," the crypto exchange "has actively assisted Yellow Tune in
laundering the proceeds of crime worth INR 370 crore using
cryptocurrency," adding:
"Therefore,
equivalent movable assets to the extent of INR 367.67 crore lying with Flipvolt
crypto exchange in the form of bank and payment gateway balances worth INR
164.4 crore and crypto assets lying in their pool accounts worth INR 203.26
crore are frozen under PMLA 2002, till a complete fund trail is provided by
the crypto exchange."
Vauld’s
website explains that "As soon as a user deposits funds to their Vauld
wallet, it goes to a centralized pool." From this pool, the funds are
allocated for lending and trading. PMLA 2002 is India’s Prevention of Money
Laundering Act.
The crypto
exchange told Business Today, "We are investigating this matter. We kindly
request your patience and support, and we will keep you updated as soon as we
have more information."
After
stopping deposits and withdrawals last month, Vauld announced a
restructuring plan on July 4 due to "financial challenges" it had
faced in recent months. Defi Payments Pte Ltd., the entity that operates Vauld
in Singapore, also applied for court protection from legal
proceedings. The exchange is currently not licensed in Singapore.
In July last
year, Vauld raised USD 25 million in a Series A funding round for its
India-based borrowing and lending platform. The round was led by Valar
Ventures, a U.S.-based venture capital fund co-founded by billionaire Peter
Thiel. Pantera Capital, Coinbase Ventures, CMT Digital, Gumi Cryptos, Robert
Leshner, Cadenza Capital, and others also participated in the funding round.
Last week,
ED announced that it had frozen the bank assets of Wazirx, a major
crypto exchange in India. The agency detailed that it conducted searches
on one of the directors of Zanmai Labs, which owns Wazirx, and issued an order
to freeze the exchange’s bank balances to the tune of INR 64.67 crore.
ED similarly
explained that the action against Wazirx is part of a money laundering
investigation involving non-bank financial companies (NBFC) and their fintech
partners for "predatory lending practices in violation of the RBI (Reserve
Bank of India) guidelines."
The Economic Times reported on Thursday that the ED is probing at
least ten cryptocurrency exchanges for allegedly laundering more than INR 1,000
crore. The crypto trading platforms allegedly did not conduct adequate due
diligence and failed to file suspicious transaction reports.
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