Binance "disappeared" WazirX for alleged money laundering
On August 5, Indian authorities announced the freezing of the assets of WazirX, an exchange crypto in the country, to investigate suspected violations of foreign exchange regulations. Although the amount of money blocked by the authorities is not large (only about 8 million USD), this information has caused a certain stir in the community. cryptocurrency.
The reason is because WazirX is a trading platform that was acquired by Binance, the world's largest cryptocurrency exchange, in 2019.
On the evening of August 6, Mr. Changpeng Zhao, CEO of Binance, sparked controversy with the shocking statement, that “Binance never acquired WazirX”.
Quick thread on Binance and WazirX, and some incorrect reporting.— CZ Binance (@cz_binance) August 5, 2022
Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders.
Accordingly, the head of Binance admitted that he had reached an investment agreement in Zanmai Labs, the company behind WazirX, but that the equity transfer was never made. Mr. Changpeng Zhao affirmed that there is only technical support relationship between the two sides. Binance provides a wallet service for WazirX and helps reduce transaction fees. WazirX remains in complete control of their exchange management, including user registration, KYC, and deposits.
The Binance CEO wrote that he was “concerned” about reports that authorities were investigating WazirX and how Zanmai Labs was operating the exchange, pledging to cooperate with Indian authorities on the investigation.
3/ Binance only provides wallet services for WazirX as a tech solution. There is also integration using off-chain tx, to save on network fees. WazirX is responsible all other aspects of the WazirX exchange, including user sign-up, KYC, trading and initiating withdrawals.— CZ Binance (@cz_binance) August 5, 2022
Controversy broke out
Soon after, Nischal Shetty, the founder of WazirX, refuted Mr. Changpeng Zhao's claims. Specifically, this person wrote on Twitter:
1/ FACTS about WazirX & Binance:— Nischal (Shardeum) ️ (@NischalShetty) August 5, 2022
WazirX was acquired by Binance
Zanmai Labs is an India entity owned by me & my co-founders
Zanmai Labs has license frm Binance to operate INR-Crypto pairs in WazirX
Binance operates crypto to crypto pairs, processes crypto withdrawal…
Facts about WazirX and Binance:
– Binance acquired WazirX;
– Zanmai Labs is an Indian company owned by me and other co-founders;
– Zanmai Labs has licensed Binance to trade Indian rupees against crypto pairs on the WazirX platform;
– Binance also manages crypto-crypto pairs and withdrawals;
2/— Nischal (Shardeum) ️ (@NischalShetty) August 5, 2022
You can check this fact by going to the TOS of WazirX
More facts about WazirX:
• Binance owns WazirX domain name
• Binance has root access of AWS servers
• Binance has all the Crypto assets
• Binance has all the Crypto profits
Don't confuse Zanmai and WazirX
Some other facts include:
– Binance owns the domain name of WazirX;
– Binance has access to WazirX's AWS server;
– Binance manages all crypto assets;
– Binance holds all WazirX profits.
Don't equate Zanmai with WazirX."
Shortly after, the CEO of Binance responded:
Sad that these have to be debated on Twitter:— CZ Binance (@cz_binance) August 5, 2022
Binance provides wallet services for WazirX.
WazirX domain is transferred to our control.
We were given a shared access to an AWS account.
We could shutdown WazirX. But we can't, because.. 1/2 https://t.co/YoMIgAHC5v
“Sad to have to debate this on Twitter:
– Binance only provides wallet services for WazirX;
– The WazirX domain name has been transferred under our management;
– We share access to AWS.
In theory, we could crash WazirX, but we don't because it would harm users.
Binance does NOT manage activities such as “user registration, KYC, trading and withdrawals”. WazirX's founding team has full control over them. They never handed over control of them to Binance, despite our requests.”
Mr. Changpeng Zhao wrote that in the 3 years since signing the agreement, Binance has repeatedly asked WazirX to hand over control, but that has not happened. Binance has chosen not to announce the deal's delay due to confidentiality provisions.
Mr. Nischal Shetty wrote:
Happy to solve it publicly so everyone is aware. Transparency wins— Nischal (Shardeum) ️ (@NischalShetty) August 5, 2022
In this tweet you're saying you want control of sign ups & KYCs
But that part is run by Zanmai India through a license by Binance
Are you open to closing deal by acquiring Zanmai India then?
Let's solve it✌️ https://t.co/q3LMqFOjc7
“I am very willing to settle things openly in front of the public. Transparency is best.
In this post he said he wants to manage user registration and KYC. But it is operated by Zanmai India under an authorized license granted by Binance. So you want to close the deal by buying Zanmai India too?
Or let's solve it together."
Binance CEO Changpeng Zhao then warned users:
If you have funds on WazirX, you should transfer it to Binance. Simple as that.— CZ Binance (@cz_binance) August 5, 2022
We could disable WazirX wallets on a tech level, but we can't/won't do that. And as much debates as we are enduring, we can't/won't hurt users.
“If you have money on WazirX, switch to Binance. Simple as that.
We can disable WazirX wallets, but we will not. Even if this controversy continues, we will not let the user influence.
Sequence of stories
Based on the information that has had the same "battle" of the head of WazirX and Binance, we have a story sequence as follows.
– In November 2019, Binance announced the acquisition of WazirX, Binance will provide a wallet platform and allow WazirX users to buy crypto with Indian rupees, as well as trade other cryptocurrencies.
The agreement also includes a provision to transfer the management of WazirX to Binance. However, according to CZ's statement, WazirX only handed over the domain name and access to the AWS server, not letting the exchange control registration, KYC and withdrawals.
– During this time, Binance still promotes WazirX in the eyes of the public as a platform that they own 100%. Changpeng Zhao also shared articles claiming WazirX as their subsidiary.
– On August 5, 2022, WazirX was frozen by Indian authorities to investigate allegations of money laundering. Binance CEO stated that he has no control over WazirX's 100% operations, the most important aspects are still managed by Zanmai Labs and refused to hand over to Binance for the past 3 years.
It can be seen that Binance is trying to separate and disclaim responsibility from WazirX, asserting that it has no control over user registration, KYC and withdrawals – aspects directly related to money laundering. The trick used by the world's largest cryptocurrency exchange is to blame Zanmai, the company that sold the ownership of WazirX to them, for the delay in the transfer.
Since the beginning of the year, Binance has been constantly involved in accusations of negligence in customer identity verification, aiding in money laundering activities with a value of up to 2.35 billion USD and having "shady" relationships. with the Russian government.