<\/p>\n
The Twitter exchange between WazirX co-founder Nischal Shetty and Binance CEO Changpeng \u201cCZ\u201d Zhao over the ownership of the Indian crypto exchange grabbed a lot of headlines in the first week of August.\u00a0<\/p>\n
WazirX was reportedly acquired by Binance in 2019, and ever since then, the Indian crypto exchange has been referred to as \u201cBinance-owned\u201d; however, to everyone\u2019s surprise, CZ took to Twitter to claim that the acquisition process never went through and Binance has no ownership in the Indian crypto exchange.<\/p>\n
\n2\/ On 21 Nov 2019, Binance published a blog post that it had \u201cacquired\u201d WazirX. This transaction was never completed. Binance has never – at any point – owned any shares of Zanmai Labs, the entity operating WazirX.<\/p>\n
\u2014 CZ Binance (@cz_binance) August 5, 2022<\/a><\/p><\/blockquote>\n
CZ said that Binance only provides wallet services for WazirX as a tech solution and WazirX is responsible for all other aspects of the exchange, including user sign-up, Know Your Customer (KYC), trading, and initiating withdrawals.<\/p>\n
Shetty countered CZ\u2019s claim in another tweet thread claiming<\/a> that Binance indeed owns the Indian crypto exchange WazirX and that the parent company, Zanmai Labs, only operates crypto and Indian rupee pairs in WazirX on a Binance license. Binance, on the other hand, operates crypto-to-crypto pairs and processes crypto withdrawals, which can be verified by the companies\u2019 terms of services.<\/p>\n
The two co-founders went back and forth for the next couple of days accusing each other of misrepresenting certain facts.<\/p>\n
\n2\/ Original deal included sale of WazirX Technology (IP)<\/p>\n
Same Technology was then licensed to Zanmai by Binance for INR market<\/p>\n
Post licensing:<\/p>\n
Binance operates crypto-crypto trading, crypto deposit\/withdrawals<\/p>\n
Zanmai operates INR-Crypto trading, INR deposit\/withdrawal<\/p>\n
\u2014 Nischal (Shardeum) \u26a1\ufe0f (@NischalShetty) August 6, 2022<\/a><\/p><\/blockquote>\n
Based on the tweet exchange between the two co-founders, it is clear that there was indeed an acquisition deal, to begin with, but Shetty claimed the deal was for the technology transfer and not the whole company, and this is the reason WazirX technology is owned by Binance, while Zanmai Labs operate only crypto\/INR pairs using a Binance license.<\/p>\n
When Cointelegraph reached out to Binance to get some clarity on the acquisition deal, the exchange denied Shetty\u2019s earlier claims that the exchange operates crypto-to-crypto trading pairs. A spokesperson from Binance told Cointelegraph:<\/p>\n
\u201cBinance does not operate crypto-to-crypto trades on the WazirX exchange. The WazirX exchange is wholly run and operated by Zanmai Labs. Further, while we did agree to purchase certain technical assets and intellectual property of WazirX, this agreement was not completed.\u201d<\/p><\/blockquote>\n
In another tweet, CZ claimed that Binance had tried to pursue the acquisition as late as February but was refused by WazirX. Shetty again responded<\/a> to the tweet, claiming the deal involved an acquisition by Binance\u2019s parent entity, but at the time of the deal, Binance gave an \u201cambiguous answer that parent entity is under restructuring.\u201d<\/p>\n
The Binance spokesperson told Cointelegraph, \u201cThe agreement between Binance and Zanmai Labs was for the acquisition of certain assets and intellectual property of WazirX, not equity in Zanmai Labs.\u201d They further added, \u201cWe had sought the assets that were supposed to be transferred to us under the agreement, but this was not forthcoming, and the agreement was not (and could not be) completed.\u201d<\/p>\n
WazirX, on the other hand, believes the solution to the current problem is either for Binance to buy out India operations using its parent entity instead of a random entity because it may create risk for users or for Binance to sell back WazirX.<\/p>\n
Taking three years to disclose the deal never went through<\/h2>\n
The core reason for the fallout between the two companies seems to be the alleged money laundering investigation by India\u2019s Enforcement Directorate (ED). The said investigation is from a year ago, and contrary to popular belief, the investigation is focusing on a Foreign Exchange Management Act (FEMA) violation rather than money laundering.<\/p>\n
\nED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transactions involving crypto-currencies worth Rs. 2790.74 Crore.<\/p>\n
\u2014 ED (@dir_ed) June 11, 2021<\/a><\/p><\/blockquote>\n
FEMA is one of many capital control regulations that the Indian government has put in place to prevent capital from leaving the country. According to FEMA, an individual is only permitted to send a maximum of $250,000 for specific purposes per year outside of India. However, due to the lack of regulations around the crypto market, FEMA laws don\u2019t cover cryptocurrency transfers. <\/p>\n
As a result, any users sending crypto transfers of above $250,000 would still violate FEMA laws. That seems to be the case with the ED\u2019s current investigation into WazirX. In total, 10 other crypto platforms are facing similar investigations from the ED.<\/p>\n
Crypto investment is not one of them. But technically, if to send more than the set amount, even in crypto, it would be a violation of FEMA. Therefore, when transferring funds to an exchange that is not India-domiciled, it is seen as a violation of FEMA regulations.<\/p>\n
Related: <\/em><\/strong>AML and KYC: A catalyst for mainstream crypto adoption<\/em><\/strong><\/p>\n
The year-old investigation made headlines again in 2022 followed by the ED freezing $8.1 million worth of the exchange\u2019s assets. The ED claimed that it couldn\u2019t find on-chain records of transactions amounting to millions of dollars. However, WazirX contradicted ED\u2019s claim and said it has records for every single transaction.<\/p>\n
The off-chain transactions referred to by the ED are the direct transfer between WazirX and Binance, a feature introduced by the two parties as part of the partnership. The feature allows the transfer of assets between two exchanges without users having to pay any transfer fee.<\/p>\n
WazirX in its official statement claimed that there was a major misunderstanding surrounding the off-chain transfers. The crypto exchange said that an ED\u2019s press release is trying to deem these transitions as mysterious and untracked, while in reality, only KYC users of the platform can use the services. Thus, there is no question about untraced funds, and WazirX said it was confident in proving ED wrong in the court of law.<\/p>\n
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