Indian Enforcement Authorities Freeze Assets of Another Cryptocurrency Exchange

The Enforcement Directorate (ED) of India has confiscated the cryptocurrency and bank holdings of Vauld, valued at around $46,439,182. A month before, Vauld suspended deposits and withdrawals. According to reports, the Indian law enforcement body is probing over ten bitcoin exchanges. The Enforcement Directorate (ED), India’s law enforcement and economic intelligence organization has confiscated the holdings of a second cryptocurrency exchange.

The organization disclosed on Friday that it has carried out searches at numerous Yellow Tune Technologies locations in Bangalore and has given a directive to confiscate $46,439,182 worth of assets, including cash holdings, payment gateway balances, and cryptocurrency balances of Flipvolt Technologies’ cryptocurrency exchange. The Singapore-based cryptocurrency trading, borrowing, and lending platform Vauld has its India-based subsidiary, Flipvolt Technologies, registered there.

ED claimed that about $50 million were placed by 23 companies into Yellow Tune Technologies’ INR wallets maintained on the cryptocurrency exchange of Flipvolt Technologies. These monies were “criminal profits from exploitative loan operations,” the authorities said.

By utilizing the cryptocurrency exchange Flipvolt, Yellow Tune aided the suspected fintech businesses in evading traditional banking routes and simply removed all the illicit funds disguised as cryptocurrencies.”

The authority said that Flipvolt had “very low KYC [know your customer] standards, no EDD [enhanced due diligence] process, no verification on the origin of the depositor’s cash, and no method for generating STRs [suspicious transaction reports].”

ED further stated that Flipvolt lacked to provide a thorough audit trail of cryptocurrency transactions performed by Yellow Tune Technologies and was unable to provide any kind of KYC for the wallets of the appellant.

The authorities determined that “by fostering ambiguity and having inadequate AML [anti-money laundering] rules,” the trading platform “actively aided Yellow Tune in laundering about $50 million in criminal profits via cryptocurrencies,” adding:

The PMLA of 2002 states, “Therefore, comparable moveable assets to the amount of about $50 million sitting with Flipvolt crypto exchange in the form of bank and payment gateway balances of $20 million and crypto assets resting in their pool accounts worth roughly $30 are frozen.”

When a user adds money to their Vauld wallet, the money is added to a central pool, as stated on the Vauld website. A portion of these funds is set aside for use as lending and trading capital. India’s anti-money-laundering law dates back to 2002 and is known as the PMLA.

The cryptocurrency exchange told Business today, “We are examining this situation, we appreciate your patience and assistance, and we will notify you whenever we get further details.”

Vauld halted deposits and withdrawals in July and unveiled a reorganization plan on July 4 owing to “financial issues” the company has experienced in recent times. Defi Payments Pte Ltd., the company that runs Vauld in Singapore, has also filed for judicial protection against pending legal procedures. Presently, the exchange is not authorized in Singapore.

In July 2021, Vauld secured $25 million in Series A investment for its loan and borrowing service in India. The financing was headed by Valar Ventures, a venture capital firm located in the United States that was co-founded by billionaire Peter Thiel. Additionally, Pantera Capital, Coinbase Ventures, CMT Digital, Gumi Cryptos, Robert Leshner, and Cadenza Capital invested in the round.

The ED notified the freezing of Wazirx’s bank assets a week before. Wazirx is a significant cryptocurrency exchange in India. The authorities said that it performed checks into one of the directors of Zanmai Labs, the company that runs Wazirx, and issued a decree to block the exchange’s bank accounts totaling $9.80 million.

ED also noted that the move against Wazirx is a portion of a probe into money laundering by non-bank financial firms (NBFC) and its fintech associates for abusive lending behaviors in contravention of the Reserve Bank of India’s norms.

Furthermore, the Economic Times revealed on Thursday that the agency is investigating a minimum of ten cryptocurrency exchanges for purportedly laundering over$12 million. Reportedly, the cryptocurrency trading platforms missed to conduct a necessary due investigation and submit fraudulent financial notifications.