The Law Enforcement Directorate of India (ED) has launched a back-to-back investigation into several digital asset exchange platforms. Vauld, a Singaporean crypto exchange, has recently come under scrutiny from the Anti-Money Laundering Agency. Embattled Asian crypto lender Vauld, in a press release on Saturday, “respectfully disagrees” with the recent freezing of some of its assets by Indian authorities.
India’s ED goes after Vauld and freezes assets
On Thursday, it was reported that India’s Directorate of Law Enforcement (ED) had frozen bank assets worth 370 billion rupees (about $48 million). These assets belonged to the struggling stock exchange, Vauld.
The news comes a week after the account of one of Zanmai Lab’s directors at WazirX, one of India’s cryptocurrency exchanges, was frozen. This development also comes as the Indian agency investigates at least 10 crypto exchanges for alleged money laundering of over $125 million.
On Friday, India’s Law Enforcement (ED) Directorate announced that it had frozen the financial accounts of Bangalore-based money services firm Yellow Tune Technologies. Flipvolt, a Singapore subsidiary of Vauld Indian, was one of the assets in question.
This decision is linked to an ongoing investigation into Chinese money laundering operations related to instant loans. This is the second time this week that the ED has taken action in the crypto industry following this case.
According to the press release, the local Vauld entity was used by 23 predatory fintech and non-banking firms to deposit millions of dollars into wallets controlled by Yellow Tune Technologies. In another case, WazirX is accused of helping 16 suspected fintech companies launder illicit loan applications.
The financial regulator announced it was restricting Yellow Tune’s bank accounts and payment gateway balances by a total of 3.7 billion rupees, or $46.4 million, in response to reports that the company was a “fictitious entity” created by two Chinese individuals using pseudonyms. According to reports, the ED spent three days investigating the suspicious Yellow Tunes locations.
The ED report said Vauld’s Indian entity had extremely lax know-your-customer (KYC) standards. It also lacks a more thorough due diligence process, no verification of depositor funding sources, and no method for reporting suspicious transaction reports (STRs), among other things.
Lax KYC [Know Your Customer] standards, loose regulatory control to allow transfers to foreign wallets without asking for a reason/declaration/KYC, not registering transactions on Blockchains to reduce costs, etc., have resulted in Flipvolt not being able to report missing crypto assets. He made no sincere effort to trace these crypto assets.
Vauld fights money laundering allegations
Vauld said the crypto lender delivered and followed ED’s summons to provide documents to investigators. He went on to say that the freeze resulted from an account belonging to a former client of the platform, which had since been closed.
Based on the above, Vauld said the company did nothing wrong and the entity is puzzled as to why such a penalty was imposed on it.
We are seeking legal advice on our best course of action to protect the interests of the company, its customers and all stakeholders. We have fully cooperated with the Law Enforcement Branch and will continue to expand our cooperation to ensure that we continue to remain a safe place for customers to transact and own cryptocurrencies.
Meanwhile, despite the collaboration, the cryptocurrency exchange expressed dissatisfaction with the government’s decision to freeze the funds.
Meanwhile, the ED report alleges that the company’s promoters are unidentifiable. It was discovered that some Chinese had created fictitious companies. However, new bank accounts were also opened in the name of fake administrators. These suspects left India in December 2020.
According to a blog post, Vauld is seeking legal advice to pursue his best course of action to protect consumers and the company. The exchange is said to strictly follow KYC standards worldwide. He also affirmed that they have fully complied with the ED and will continue to do so.
Vauld remains in trouble
Notably, in July, Singapore-based Vauld halted deposits, transactions and withdrawals on its platforms after announcing layoffs during a market downturn. Accused fintech companies are now accused of using the platform to avoid regular banking channels and processing all fraudulent money in the form of crypto assets.
The platform is currently being tested as a top money laundering participant by encouraging obscurity and having lax AML standards. Vauld is one of many crypto lenders struggling with liquidity. Singapore’s High Court has granted Vauld a three-month moratorium while he considers options to resolve his economic difficulties.