India Freezes Peter Thiel-Backed Vauld’s Crypto and Bank Assets Worth $46 Million – Regulation Bitcoin News

India’s Enforce­ment Direc­torate (ED) has frozen cryp­to exchange Vauld’s cryp­to and bank assets worth about INR 370 crore ($46,439,181). Vauld halt­ed deposits and with­drawals last month. The Indi­an law enforce­ment agency is report­ed­ly inves­ti­gat­ing more than 10 cryp­tocur­ren­cy exchanges.

Indian Authority Freezes Another Cryptocurrency Exchange’s Assets

The Enforce­ment Direc­torate (ED), a law enforce­ment and eco­nom­ic intel­li­gence agency of the gov­ern­ment of India, has frozen the assets of anoth­er cryp­tocur­ren­cy exchange.

The agency announced Fri­day that it has con­duct­ed search­es at var­i­ous premis­es of Yel­low Tune Tech­nolo­gies in Ban­ga­lore and has issued an order to freeze its bank bal­ances, pay­ment gate­way bal­ances, and cryp­to bal­ances of Flip­volt Tech­nolo­gies’ cryp­to exchange total­ing 370 crore rupees ($46,439,181) worth of assets. Flip­volt Tech­nolo­gies is the India-reg­is­tered enti­ty of Sin­ga­pore-head­quar­tered Vauld, a cryp­tocur­ren­cy trad­ing, bor­row­ing, and lend­ing platform.

ED explained that approx­i­mate­ly 370 crore rupees were deposit­ed by 23 enti­ties into the INR wal­lets of Yel­low Tune Tech­nolo­gies held with Flip­volt Tech­nolo­gies’ cryp­to exchange. These amounts were “pro­ceeds of crime derived from preda­to­ry lend­ing prac­tices,” the author­i­ty said, elaborating:

Yel­low Tune by using the assis­tance of Flip­volt cryp­to exchange … assist­ed the accused fin­tech com­pa­nies in avoid­ing reg­u­lar bank­ing chan­nels, and man­aged to eas­i­ly take out all the fraud mon­ey in the form of cryp­to assets.

The agency alleged that Flip­volt “has very lax KYC [know-your-cus­tomer] norms, no EDD [enhanced due dili­gence] mech­a­nism, no check on the source of funds of the depos­i­tor, no mech­a­nism of rais­ing STRs [sus­pi­cious trans­ac­tion reports].”

In addi­tion, Flip­volt failed to give the com­plete trail of cryp­to trans­ac­tions made by Yel­low Tune Tech­nolo­gies and could not sup­ply any form of KYC of the oppo­site par­ty wal­lets, ED noted.

The author­i­ty con­clud­ed that “by encour­ag­ing obscu­ri­ty and hav­ing lax AML [anti-mon­ey laun­der­ing] norms,” the cryp­to exchange “has active­ly assist­ed Yel­low Tune in laun­der­ing the pro­ceeds of crime worth 370 crore rupees using cryp­tocur­ren­cy,” adding:

There­fore, equiv­a­lent mov­able assets to the extent of Rs 367.67 crore lying with Flip­volt cryp­to exchange in the form of bank and pay­ment gate­way bal­ances worth Rs 164.4 crore and cryp­to assets lying in their pool accounts worth Rs 203.26 crore are frozen under PMLA, 2002, till com­plete fund trail is pro­vid­ed by the cryp­to exchange.

Vauld’s web­site explains that “As soon as a user deposits funds to their Vauld wal­let, it goes to a cen­tral­ized pool.” From this pool, the funds are allo­cat­ed for lend­ing and trad­ing. PMLA, 2002, is India’s Pre­ven­tion of Mon­ey Laun­der­ing Act.

The cryp­to exchange told Busi­nessto­day: “We are inves­ti­gat­ing this mat­ter, we kind­ly request your patience and sup­port, we will keep you updat­ed as soon as we have more infor­ma­tion on this.”

After halt­ing deposits and with­drawals last month, Vauld announced a restruc­tur­ing plan on July 4 due to “finan­cial chal­lenges” it faced in recent months. Defi Pay­ments Pte Ltd., the enti­ty that oper­ates Vauld in Sin­ga­pore, also applied for court pro­tec­tion from legal pro­ceed­ings being com­menced against it. The exchange is cur­rent­ly not licensed in Singapore.

In July last year, Vauld raised $25 mil­lion in a Series A fund­ing round for its India-based bor­row­ing and lend­ing plat­form. The round was led by Valar Ven­tures, a U.S.-based ven­ture cap­i­tal fund co-found­ed by bil­lion­aire Peter Thiel. Pan­tera Cap­i­tal, Coin­base Ven­tures, CMT Dig­i­tal, Gumi Cryp­tos, Robert Lesh­n­er, Caden­za Cap­i­tal, and oth­ers also par­tic­i­pat­ed in the round.

Last week, ED announced that it has frozen the bank assets of Wazirx, a major cryp­to exchange in India. The author­i­ty detailed that it con­duct­ed search­es on one of the direc­tors of Zan­mai Labs, which owns Wazirx, and issued an order to freeze the exchange’s bank bal­ances to the tune of INR 64.67 crore.

ED sim­i­lar­ly explained that the action against Wazirx is part of a mon­ey laun­der­ing inves­ti­ga­tion involv­ing non-bank finan­cial com­pa­nies (NBFC) and their fin­tech part­ners for “preda­to­ry lend­ing prac­tices in vio­la­tion of the RBI [Reserve Bank of India] guidelines.”

In addi­tion, the Eco­nom­ic Times report­ed Thurs­day that ED is prob­ing at least 10 cryp­tocur­ren­cy exchanges for alleged­ly laun­der­ing more than INR 1,000 crore. The cryp­to trad­ing plat­forms alleged­ly did not con­duct ade­quate due dili­gence and failed to file sus­pi­cious trans­ac­tion reports.

What do you think about India freez­ing bank accounts of cryp­tocur­ren­cy exchanges? Let us know in the com­ments sec­tion below.

Kevin Helms 

A stu­dent of Aus­tri­an Eco­nom­ics, Kevin found Bit­coin in 2011 and has been an evan­ge­list ever since. His inter­ests lie in Bit­coin secu­ri­ty, open-source sys­tems, net­work effects and the inter­sec­tion between eco­nom­ics and cryptography.

Image Cred­its: Shut­ter­stock, Pix­abay, Wiki Com­mons, lev radin