WazirX & Binance Ownership Spat

WazirX & Binance ownership spat
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Over the weekend, a verbal spat broke out, prompting inquiries about the ownership of WazirX, the Indian cryptocurrency exchange with the highest trading volumes.

The CEO of Binance, Changpeng Zhao, popularly known as CZ, stated that the company “never—at any point—owned any shares of Zanmai Labs, the entity operating WazirX,” following the announcement in November 2019 that Binance had bought WazirX.

His tweets began a short while after the ED said in a statement on August 5 that Zanmai Labs, the business that owns WazirX, set up a web of contracts with Crowdfire Inc., Binance (Cayman Islands), and Zettai to “obscure the ownership of the crypto exchange.”

Structure and Ownership

2018 saw the founding of WazirX by Sameer Mhatre, Siddharth Menon, and Nischal Shetty.  According to the most recent regulatory papers accessible through Tofler, the cryptocurrency exchange increased the number of its crew over the previous year to 250 while income increased to Rs 105 crore in FY21 from Rs 26 lakh the year before.

In regulatory documents, Shetty and Mhatre are identified as directors of Zanmai Labs. Having its headquarters in Singapore, Zettai owns 99.99 percent of Zanmai Labs, with Shetty owning the remaining 0.01 percent.

Zettai is owned by the three cofounders, with Shetty having the largest part (74.3 percent). 18.6% and 7.2 percent, respectively, are held by Mhatre and Menon.

Founders Step Away

WazirX’s two cofounders leaving India is the other component of this lawsuit that involves them. The relocation of Shetty and Menon’s base to Dubai was not disclosed to some employees, according to Moneycontrol.

The two co-founders have left their current businesses, according to Moneycontrol, which broke the news first on February 16. In February, Shetty founded Shardeum, a blockchain platform that is decentralized. The Layer-1 Web3 company informed its clientele that a seed round of $18.28 million funding is almost complete.

How The Spat Unraveled?

According to the ED’s statement, Shetty first informed the inquiry group that WazirX controls all cryptocurrency-to-cryptocurrency and rupee-to-crypto transactions and merely has an IP and preference agreement with Binance.

“However, Zanmai now asserts that they are exclusively involved in INR-crypto transactions and that Binance handles all other transactions on WazirX. To avoid scrutiny by Indian regulatory institutions, they are providing conflicting and unclear responses, the ED claimed.

“The entire industry is at a loss. Everyone believed Binance to be the owner of WazirX. The question now is which government has the resources to look for data, according to an industry executive who wished to remain anonymous. WazirX is now facing difficulties since, throughout, their attitude has been that you should provide data to go to Binance. But now with Binance saying it is not involved, then their claims are under question.”

The ED tweeted that it had issued a show-cause notice to the exchange for “contravening FEMA, 1999 for transactions involving cryptocurrencies worth Rs. 2790.74 crores,” which is when WazirX’s problems began.

The warning was given to WazirX, the government claims since it permitted the outbound transfer of cryptocurrency assets to unidentified wallets. All of the cryptocurrency transactions between WazirX and Binance were not being tracked on blockchains, according to Pankaj Chaudhary, the state minister of finance.

Transaction Data

Off-chain transfers were the largest issue. The authorities would not need to question Shetty or CZ about these transactions if you had cryptocurrency withdrawals recorded on the blockchain because the transaction would be traceable. Off-chain transfers, however, are completely obscured because they deal with information that is under their control, the executive said.

The exchange did not have any other information to share, according to a few WazirX employees, who also stated that Binance was required for access to the remaining data.

A lawyer who wished to remain anonymous said that “both sides are seeking to keep the entity that ED is trying to collect data from beyond the jurisdiction of the investigation agency.” If WazirX claims WazirX is running on its own and WazirX claims the data is with Binance, they are just trying to dodge the long arm of the law.”

WazirX, meanwhile, has been claiming for a number of days that it is fully collaborating with the ED and has answered all of their questions completely and transparently. The fact that there isn’t a specific regulation for cryptocurrency exchanges, despite extensive and continuous discussion, only complicates the situation.

WazirX and Binance’s off-chain fund transfer channel will be shut down, Binance announced on August 8th. Additionally, Binance will assist Indian regulators in any WazirX-related concerns.

Future of WRX Coin

The future of the WazirX cryptocurrency is another crucial issue (WRX). Following the 2019 agreement with WazirX, Binance completed the inaugural exchange offering and offered WRX tokens for sale on its platform. Shetty maintains that Binance controls the WRX distribution, and as a result, it has the authority to delist the coin at any time.

A spokesman for Binance said, “As for listing or delisting, we don’t comment on any single token or coin.” At Binance, we regularly assess each digital asset we list to make sure it maintains the high caliber of standards we demand.

When the exchange transacted more than $43 billion worth of cryptocurrency last year, WRX was among the most popular currencies traded there. Additionally, it stated that the exchange had over 10 million users.

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