As a long-time observer of the cryptocurrency industry, I find myself deeply concerned about the ongoing saga surrounding WazirX and its enigmatic founder Nischal Shetty. The recent revelations by Shetty himself, that Binance holds significant control over WazirX, have only added to the confusion and uncertainty for users of this platform.
As a crypto investor, I’ve been following the recent turmoil surrounding the WazirX exchange hack and the recovery of user funds. On Monday, co-founder Nischal Shetty sparked a new round of conversation when he asserted that he is no longer the proprietor of the platform. However, to avoid delving deeper into the matter, he cited a “confidentiality clause” as the reason for his inability to disclose more information about the ownership.
Currently, there is confusion among users about who exactly owns the WazirX cryptocurrency exchange, its WRX tokens, and the two parent companies, Zanmai and Zettai, which manage the platform. This uncertainty persists even as billions of rupees in user funds remain precariously balanced.
Following WazirX’s initial phase for fund recovery and compensation, Shetty made a statement after they permitted users to withdraw 33% of their INR holdings. This move came in response to the hack on July 18 that led to a loss of approximately Rs 2000 crore worth of user funds.
Initially in 2019, WazirX announced that it was acquired by Binance, but the relationship between the two platforms didn’t last long. Later, in 2022, India’s top investigative body, the Enforcement Directorate, alleged that WazirX co-founder Nischal Shetty attempted to hide the true ownership of the exchange by establishing multiple companies based in Singapore.
In this special feature, we’ll unravel the complicated issues surrounding the ownership of WazirX and the predicament that users find themselves in, as they now rely on Shetty and his team to recover their assets.
Nischal Shetty’s Latest Revelation
On August 26th, Nischal Shetty addressed a suggestion from a user on ‘X’, who proposed that he should consider selling a portion of WazirX to compensate users impacted by the WazirX hack.
I appreciate your worries, however, it’s important to note that I don’t have the right to sell something that isn’t mine. If it were in my possession, I would go to great lengths to help you. Unfortunately, I relinquished control of the platform in 2019, so I can no longer make direct decisions about it. However, I am dedicated to assisting you in every way possible within the boundaries of my current role and resources.
— Nischal (Shardeum) 🔼 (@NischalShetty) August 26, 2024
Shetty clarified that as he had parted ways with WazirX in 2019, he no longer holds ownership over the platform. Yet, he emphasized his dedication to helping the community in any way possible amidst the recent cyberattack.
As someone who has closely followed the Indian cryptocurrency market and its developments over the past few years, I can’t help but feel a sense of unease upon hearing about the recent turmoil surrounding WazirX. Having witnessed the growth and potential of this platform, it’s disheartening to see the confusion and concerns that have arisen within the Indian community regarding its ownership.
The Ownership Tug of War b/w WazirX and Binance
For quite some time now, there’s been a heated debate about who truly owns WazirX, with Binance and Shetty presenting compelling points. Binance, known for its size among global cryptocurrency exchanges, declared in 2019 that it had taken over WazirX, an action seen as a smart move to penetrate the Indian market. WazirX also echoed this news, making the announcement via their official website.
Nevertheless, the specifics of this takeover remain unclear, and the alliance between Binance and WazirX has faced controversies.
In August 2022, Binance CEO Changpeng Zhao clarified that Binance does not hold any ownership stake in the company operating WazirX (Zanmai Labs). This statement was made after CZ expressed strong criticism towards WazirX for not cooperating. Notably, CZ is currently serving a four-month sentence at a halfway house due to money laundering charges.
In a post on X, CZ made clear that “Binance do NOT have control on their (WazirX) systems”. CZ clarified that while Binance provided wallet services for WazirX and had control over the WazirX domain and shared access to an AWS account, the operational control of WazirX was never fully transferred to Binance.
Binance CZ Puts Counter Claims against WazirX’s Nischal Shetty
According to CZ, although Binance acquired WazirX, they couldn’t close down the exchange since the essential functions like user registration, Know Your Customer (KYC) procedures, and trading operations continued to be managed by WazirX’s founding team, headed by Shetty.
In the return argument, Nischal Shetty, the CEO of WazirX, has clarified the ownership structure of WazirX in response to CZ’s allegations. According to Shetty, WazirX was indeed acquired by Binance.
Yet, Zanmai Labs – an Indian company owned by Shetty and his partners – manages the Indian Rupee (INR) to Cryptocurrency transactions on the WazirX platform, under a license from Binance. On the other hand, Binance handles the crypto-to-crypto pairs and supervises the processing of cryptocurrency withdrawals.
1/ Insights on WazirX and Binance:
— Nischal (Shardeum) 🔼 (@NischalShetty) August 5, 2022
Additionally, Shetty emphasized that the details provided can be confirmed by reviewing the Terms of Service on the WazirX platform itself. He went on to clarify that Binance is the owner of the WazirX domain name and has administrative control over its AWS servers, managing all cryptocurrency assets and retaining all related earnings. Moreover, Shetty stressed the importance of distinguishing between Zanmai Labs and WazirX, advising against confusing the two entities.
The ED Probe and the Three-Layer Ownership Structure
In simpler terms, Indian authorities are examining WazirX as part of a wider investigation concerning potential money laundering incidents within the digital currency market.
In the 2022 investigation, the Enforcement Directorate discovered a multi-layered corporate structure with three tiers of companies, which seemed to have been used by Nischal Shetty and his associates to conceal the true ownership of WazirX. The ED’s findings indicated that WazirX was being managed in such a way as to shield the actual owners from both public and regulatory oversight.
The Directorate of Enforcement (ED) investigation involves a complex web of agreements between various entities, including Zanmai Labs Pvt Ltd (the owner of WazirX), Crowdfire Inc. USA, Binance (Cayman Islands), and Zettai Pte Ltd Singapore. This
It’s been discovered that WazirX was originally controlled by Zanmai Labs, a company with ties to various offshore businesses. This intricate network of ownership has created challenges for regulators to identify the ultimate decision-makers at WazirX. Despite the Enforcement Directorate’s attempts, the real owners have yet to be clearly identified, leaving users uncertain about the platform’s leadership.
During the probe, it was found that WazirX had been part of deals where substantial funds, initially held by fintech firms, were channeled into cryptocurrencies. These cryptocurrencies were later allegedly laundered overseas.
Even after multiple opportunities, WazirX was unable to disclose vital information such as the identity verification details of the wallets concerned and the transactions linked to these funds. The investigation uncovered problems like weak KYC regulations, lack of transaction logging on the blockchain, and insufficient Anti-Money Laundering (AML) measures. As a result, the Enforcement Directorate seized assets worth approximately INR 64.67 crore associated with WazirX under the Prevention of Money Laundering Act (PMLA), 2002.
It’s been claimed that this three-tier ownership system was intentionally set up to conceal the real owners of WazirX, potentially breaching the rules as defined by Indian regulatory bodies.
WazirX Users left at the mercy of Nischal Shetty
In a confusing situation, WazirX users find themselves potentially at risk since their significant assets remain trapped within the exchange. With Nischal Shetty, the platform’s previous owner, still being recognized as its public figure, users are left without a definitive leader to guide them and lack clarity about who holds control over the funds. This ambiguity has exposed users to potential risks, as they have no clear entity to approach for assistance or resolution.
Additionally, Shetty, seemingly targeting his critics, urged users against filing lawsuits against the exchange, suggesting that such disputes could drag on for years. Given that Shetty resides in Dubai and WazirX’s legal matters are to be addressed in Singapore, investors find themselves with limited options other than complying with Shetty’s instructions.
Conclusion
Until they receive their funds, WazirX users find themselves in a continuous state of apprehension, relying on Shetty’s assurances and the unclear transactions happening behind the curtain.
In simpler terms, if there’s no identifying data about the fund’s owner for users to access, who would be responsible for securely recovering these lost funds – could it be Nischal Shetty, Binance, or some other organization?
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2024-08-27 16:39