Amid the ongoing controversy around WazirX exchange hack and subsequent recovery of user funds, its co-founder Nischal Shetty ignited a fresh debate on Monday when he claimed he is no longer the owner of the exchange. Preventing any further discussion on the topic, Nischal claimed that he is guided by a “confidentiality clause” to not divulge further details on the ownership.
Users are now wondering who actually owns WazirX exchange, its WRX tokens and the two parent companies Zanmai and Zettai that control the exchange even as thousands of crores of user funds hang by a tiny thread.
The statement of Shetty comes after WazirX platform allowed withdrawal of 33% INR funds of users in their first phase of funds recovery and compensation plan post the July 18 hack which resulted in loss of user funds amounting Rs 2000 crore.
The WazirX exchange had initially claimed in 2019 that they had been acquired by Binance exchange, however, the two exchanges fell off after a brief period. In 2022, India’s premier investigative agency ‘Enforcement Directorate’ had claimed that co-founder Nischal Shetty had tried to obscure the real ownership of WazirX through multiple layers of companies based out of Singapore.
In this exclusive article, we will decipher the ownership woes of WazirX and how users are now left at the mercy of Shetty and co. to get their funds back.
Nischal Shetty’s Latest Revelation
In a statement made on August 26, Nischal Shetty responded to a user on ‘X’, who suggested he sell some percent of WazirX to pay back users affected in the WazirX hack.
He stated that he cannot sell something he no longer owns. Shetty pointed out that since he sold WazirX back in 2019, the platform is no longer under his control. However, he assured the community of his commitment to doing everything within his power to assist those affected by the cyberattack.
This post has raised concern in the Indian community, leaving them in a dilemma about the true owner of WazirX amidst ongoing turmoil on the platform.
The Ownership Tug of War b/w WazirX and Binance
The controversy over the ownership of WazirX has been brewing for years, with strong arguments between Shetty and Binance. Binance, which is one of the largest cryptocurrency exchanges globally, claimed in 2019 that it had acquired WazirX, a move that was seen as a strategic expansion into the Indian market. WazirX also confirmed this news as they shared the announcement from their official website.
However, the exact details of this acquisition have been murky, and the relationship between Binance and WazirX has been caught in disagreements.
In August 2022, Binance CEO Changpeng Zhao (CZ) publicly distanced Binance from WazirX, stating that Binance does not own any equity in Zanmai Labs, the entity that operates WazirX. Changpeng Zhao, who is currently serving a four-month sentence in a halfway house for money laundering violations, had spit fire against WazirX’s non-cooperative behavior.
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, despite the so called “acquisition” of WazirX by Binance, they couldn’t shut down the exchange because the platform’s core operations, including user sign-ups, KYC processes, and trading activities, remained under the control of WazirX’s founding team, led 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.
However, Zanmai Labs, an Indian entity owned by Shetty and his co-founders, operates under a licence from Binance to manage the INR-Crypto pairs on the WazirX platform. Meanwhile, Binance is responsible for the crypto-to-crypto pairs and oversees the processing of crypto withdrawals.
Shetty also pointed out that this information can be verified by checking WazirX’s Terms of Service. He further elaborated that Binance holds ownership of the WazirX domain name, has root access to the AWS servers, controls all the crypto assets, and retains all crypto-related profits. He highlighted the distinction between Zanmai Labs and WazirX, urging people not to conflate the two.
The ED Probe and the Three-Layer Ownership Structure
The Enforcement Directorate (ED) of India has been investigating WazirX as part of its broader probe into money laundering activities in the cryptocurrency sector.
In its 2022 probe, the ED uncovered a complex ownership structure involving three layers of companies that allegedly helped Nischal Shetty and his associates obfuscate the true ownership of WazirX. The ED’s report suggested that WazirX was being operated in a manner designed to keep the real owners hidden from public and regulatory scrutiny.
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.
The probe revealed that WazirX was initially owned by Zanmai Labs, which was linked to other offshore entities. This complex web of ownership has made it difficult for regulators to find out who exactly holds the reins at WazirX. Despite the ED’s efforts, the true ownership remains a mystery, leaving users in the dark.
During the investigation, ED discovered that WazirX was involved in transactions where large sums of money were diverted by fintech companies into crypto-assets, which were then laundered abroad.
Despite repeated chances, WazirX failed to provide crucial information, including the KYC details of the wallets involved and the transactions related to these funds. The probe highlighted issues such as lax KYC norms, non-recording of transactions on the blockchain, and inadequate AML controls. For this, the ED also froze assets worth INR 64.67 crore belonging to WazirX under the Prevention of Money Laundering Act (PMLA), 2002.
This three-layer ownership structure was allegedly designed to obscure the true ownership of WazirX and violate regulations outlined by Indian regulatory agencies.
WazirX Users left at the mercy of Nischal Shetty
With no clear ownership, WazirX users find themselves in a dangerous position given their maximum funds are still locked in the exchange. Users are now left at the mercy of Nischal Shetty, who, despite claiming to have sold the platform, is still seen as the public face of WazirX. The absence of clear leadership and details about who owns how many funds have left users vulnerable, with no clear authority to turn to for recourse.
Moreover, Shetty, in an apparent attack on his critics, had advised users to not take legal action against the exchange, as it would take years to resolve the matter. Since Shetty himself is stationed in Dubai and WazirX’s legal disputes are to be heard in Singapore, there are not many choices for investors except for dancing to Shetty’s tunes.
Conclusion
Until they get their funds back, WazirX users are stuck in a perpetual state of uncertainty, dependent on Shetty’s word and the obscure dealings behind the scenes.
The question is, who will ensure the safe recovery of lost funds when no clear information about the owner is available to users? Will it be Nischal Shetty, Binance, or another entity?
Read More: Staring at Imminent Collapse, WazirX Owner Floats Conspiracy Theories
