The Enforcement Directorate (ED) searched the offices of leading crypto exchange CoinSwitch Kuber at five different locations on Thursday, as the agency continues to investigate allegations of Foreign Exchange Management Act (FEMA) violations by crypto platforms, the Economic Times reported.
Without confirming the report, a company spokesperson told Be[In]Crypto, “We receive queries from various government agencies. Our approach has always been that of transparency. Crypto is an early stage industry with a lot of potential and we continuously engage with all stakeholders.”
Another report revealed, citing sources, that the homes of the company’s directors and CEO, as well as the business location of the company, are the five premises being searched.
Another Indian crypto platform in trouble
The news comes after ED froze the bank account of one of the directors of WazirX operator Zanmai Lab Private Ltd., and Singaporean crypto lender Vauld is also seeking legal counsel in the ongoing case where ED has issued a freezing order.
The ED is reportedly investigating dubious peer-to-peer (P2P) transactions, and according to a source of the paper, “The probe has found their (KYC) to be either bogus or dubious in more than 80% of the cases.”
“The agency has found them to be in violation of section 11 (A) of the PMLA Act, which requires every reporting entity to verify the identity of its client,” the source added.
The investigating agency is also said to be tracking non-banking financial companies and fintech partners of rapid loan apps that operate in violation of central bank guidelines. CoinSwitch is now the third platform that is being investigated for laundering criminal proceeds of these illicit loan applications.
The local paper states that the federal agency is looking into claims that CoinSwitch diverted proceeds of crime of 365 instant loan apps.
Falling volumes stunt fundraising ability
Amid the building trouble for Indian platforms, a Web3 Discovery Fund was recently launched by CoinSwitch to provide investment to early-stage business owners creating blockchain solutions for the web3 industry. Particularly considering that India is home to an estimated 115 million cryptocurrency investors, nearly half of whom intend to increase their holdings in the coming six months.
Meanwhile, Nischal Shetty, co-founder of the Indian cryptocurrency exchange WazirX, is also raising money for a new business even though authorities are looking into his first venture.
With previous reports stating that at least 10 crypto exchanges are under the Indian agency scanner for an alleged money laundering of over $125 million, future reports of raids will not be unexpected.
Sidharth Sogani, the Founder and CEO of CREBACO Global project that “Indian exchanges will continue to face a liquidity crunch.”
His company noted in a series of tweets that the majority of the cryptocurrency exchanges have seen ‘declining trading volumes as Web 3.0 in India continues to be impacted by the trident effect of India’s current strict tax structure and lack of regulations.’ Sogani also remarked that the ability of these platforms to raise fresh capital is the biggest concern henceforth.
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