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Binance In Hot Water – Denies One, Gets Sued By Another

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The start of August hasn’t been kind lately to Binance.

The top cryptocurrency exchange has recently been embroiled in two ugly issues: a business partnership turned sour and a lawsuit from overseas.

First, it denied being the owner of WazirX, an Indian cryptocurrency platform in Mumbai.

Earlier this month, an Indian government agency placed WazirX under investigation for money laundering allegations.

Naturally, any company wouldn’t want to be associated with another one facing criminal charges.

COPYRIGHT_WI: Published on https://washingtonindependent.com/ebv/binance/ by Kenzo Norman on 2022-08-10T09:27:17.791Z

The denial from Binance led to a public squabble – more of a Twitter squabble – between its CEO, Changpeng “CZ” Zhao, and WazirX’s co-founder, Nischal Shetty.

While one side declares there’s no business ownership at all, the other side discredits the claim.

Second, Binance has another problem to deal with: a lawsuit to the tune of £10 billion (roughly $12.1 billion).

Last week, Zhao appeared on a Yahoo! Finance segment called “Crypto Corner.”

There, the 44-year-old multibillionaire shared, among other things, his insights on the prospects for the cryptocurrency industry.

In the coming days, many would like to know what Zhao would say about these latest issues concerning Binance.

Binance CEO on crypto hacking, crypto regulation and the outlook for the crypto industry

Binance Puts An ‘X’ Mark On WazirX

Binance likely wanted to distance itself from WazirX because of the latter’s recent legal woes.

Operating under India’s Department of Revenue of the Ministry of Finance, Enforcement Directorate (ED) is the country’s economic crime buster.

Based on its press release dated August 5, 2022, the agency conducted a “search operation” on WazirX Director Sameer Mhatre on August 3.

ED stated that he was “non-cooperative,” which prompted the said probe.

On the contrary, the director was keen on pursuing something else.

ED discovered that Mhatre “actively assisted” an estimated 16 fintech companies to launder money through “the crypto route.”

With its fraudulent activities, ED froze a bank account by Mhatre, where some of WazirX’s “moveable assets” were deposited.

At that time, it had a balance of INR/Rs (Indian Rupee) 64.67 Crore (1 crore = 10 million), or around $8.1 million.

WazirX India Ka Bitcoin Exchange
WazirX India Ka Bitcoin Exchange

This is not the first time WazirX got confronted by ED, according to CoinDesk.

In 2021, ED accused WazirX of violating India’s Foreign Exchange Management Act (FEMA) when it processed questionable crypto transactions that totaled to $382 million.

Despite its current predicament, WazirX informed its users that it’s still business as usual.

On August 6, WazirX: India Ka Bitcoin Exchange (@WazirXIndia) tweeted:

Notwithstanding the action taken by the Enforcement Directorate (ED), we would like to state that currently deposits and withdrawals are working as usual.

On that same day, CZ Zhao (@cz_binance) tweeted his 6.7 million followers:

If you have funds on WazirX, you should transfer it to Binance. Simple as that.

The Denial

The recent actions of ED instigated the falling-out between Binance and WazirX.

In its press release, ED mentioned Mumbai-based Zanmai Labs (est. 2017) as the owner of crypto exchange WazirX.

Binance had to publicly clarify that it’s not its owner.

Zhao did that in a series of tweet on August 5, beginning with this one:

Binance does not own any equity in Zanmai Labs, the entity operating WazirX and established by the original founders.

The association could be partly blamed on an old blog post by Binance.

He added that the primary business role of Binance in WazirX’s operation is that it “provides wallet services . . . as a tech solution.”

Finally, Zhao ended the series of tweets by saying that they “would be happy to work with ED in any way possible.”

WazirX co-founder Nischal Shetty and Binance CEO CZ Zhao
WazirX co-founder Nischal Shetty and Binance CEO CZ Zhao

However, Nischal Shetty, a software developer-turned-entrepreneur and co-founder of WazirX, was singing a different tune.

On August 6, he stated via Twitter:

WazirX was acquired by Binance.

Shetty said that he and some co-founders own Zanmai Labs, which obtained a “license from Binance to operate INR-Crypto pairs in WazirX.”

To attest that Binance owns WazirX, Shetty wrote (in a follow-up tweet) some “facts about WazirX.”

First: “Binance owns WazirX domain name.”

Then, Binance has:

  • “root access of AWS [Amazon Web Services] servers”
  • “all the Crypto assets”
  • “all the Crypto profits”

Shetty concluded his explanations with this reminder:

Don’t confuse Zanmai and WazirX.

The Multibillion-Dollar Lawsuit

Even before its skirmish with WazirX started, a legal crisis sprouted to challenge Binance.

It’s being sued for £10 billion.

Per Forbes, the real-time net worth of CZ Zhao is $17.4 billion.

Financial News reported on August 9 that British economist David Anthony Currie filed a lawsuit on July 29 against Binance.

The $74 billion-man Changpeng Zhao on the cover of Fortune April-May 2022 issue
The $74 billion-man Changpeng Zhao on the cover of Fortune April-May 2022 issue

Also named in the lawsuit are the following cryptocurrency exchanges:

  • U.K.-based Bittylicious
  • California-based Kraken
  • Colorado-based ShapeShift

Currie served as chairman of the U.K. business regulator Competition and Markets Authority (CMA) from 2014 to 2018.

He filed charges on behalf of approximately 250,000 investors of Bitcoin SV (Bitcoin Satoshi Vision/BSV).

The former chairman accused Binance and the other aforementioned crypto exchanges of, in the words of Financial News, “anti-competitive behavior.”

Because of such, Currie alleged that BSV investors lost an estimated £9.9 billion in 2019.

Financial News added that Binance and the others have yet to respond to its request for comments.

More Scrutiny From Abroad

In terms of trading volume, Binance remains to be the world’s largest crypto exchange.

As of this writing, per CoinMarketcap, its trading volume is $14.1 billion (up by 19.5 percent).

Still, according to NextAdvisor, despite the “low fees” of Binance.US, “investors should take a pass.”

A stack of Bitcoins and a smartphone held by a hand showing Bitcoin trading on the Binance website
A stack of Bitcoins and a smartphone held by a hand showing Bitcoin trading on the Binance website

In Asia, CoinGeek reported that the Securities and Exchange Commission (SEC) of the Philippines will act on the “illegal operations” of Binance.

SEC said in a letter that Zhao’s company doesn’t have “the necessary authority and/or license to solicit investments” in the country.

In Europe, according to Financial News, a similar issue met Binance.

The Dutch central bank imposed a €3.3 million penalty for operating in the Netherlands without proper authorization.

It seems Binance must straighten out its act before investors lose confidence.

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About The Authors

Kenzo Norman

Kenzo Norman - Kenzo is a journalist-turned-marketer who is fascinated by how storytelling and targeted marketing can result in content that changes businesses. He is responsible for implementing inbound marketing strategies that help his clients raise brand awareness, generate leads, and gain new customers as an Account Executive. Jason enjoys reading on the beach, tracking down mono records, and playing guitar when he is not working.

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