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Vauld disagrees with ED freeze on Rs 370-crore bank assets for money laundering – Moneycontrol

Photographer: Valeria Mongelli/Bloomberg

Crypto lending platform Vauld has come out with a statement to disagree with the Enforcement Directorate perspective on its KYC and AML procedures and the subsequent freeze on its bank assets.

“It is unfortunate that despite extending our cooperation, the Enforcement Directorate (ED) has proceeded to pass a freezing order, pursuant to which crypto assets in the pool wallets of the company have ordered to been frozen to the extent of approximately Rs 2,040 million. The freezing order is specific to that one customer that availed our services for a brief period of time, whose account we subsequently deactivated. We respectfully disagree with the freezing order,” Vauld said in the statement.

“We follow strict KYC requirements in every country, including India. We are seeking legal advice on our best course of action in order to protect the interests of the company, its customers, and all the stakeholders. We have fully cooperated with the Enforcement Directorate and will continue to extend our cooperation to ensure we continue to remain a safe place for customers to transact and own cryptocurrencies,” it said.

The Enforcement Directorate (ED) on Friday said that it was freezing its bank balances, payment gateway balances and crypto balances worth Rs 370 crore for allegedly assisting predatory lending apps under the ED’s investigation at present of crypto lending platform Vauld.

Payment gateway balances stood at Rs 164.4 crore and crypto assets lying in their pool accounts were worth Rs 203.26 crore at the time of the freeze.

The ED had conducted searches at various premises of Yellow Tune Technologies Private Limited at Bangalore, and the assets frozen belongs to Flipvolt Crypto-currency exchange, which runs Vauld.

The move comes exactly a week after WazirX’s bank assets worth Rs. 64.67 crore were halted last Friday in a similar same case.

“After the criminal investigation began, many of these fintech apps have shut shop and diverted huge profits earned using this modus operandi. While doing fund trail investigation, the ED found that large amount of funds to the tune of Rs 370 crore were deposited by 23 entities, including accused NBFCs and their fintech companies into the INR wallets of Yellow Tune Technologies held with crypto exchange Flipvolt Technologies Private Limited. These amounts were nothing but proceeds of crime derived from predatory lending practices,” according to a statement from the ED.

Crypto currency so purchased was transferred to various unknown foreign wallet addresses, it said.

On searching various premises of Yellow Tune Technologies between August 8 and 10, beneficial owners of this firm and the recipient wallets couldn’t be traced.

“It is found that this shell entity was incorporated by Chinese nationals Alex and Kaidi (real name not known) with the active connivance of willing CAs/CSs and the Bank Accounts were opened in the name of dummy Directors,” the ED noted.

Flipvolt crypto exchange allegedly had very lax KYC norms, loose regulatory control of allowing transfers to foreign wallets without asking any reason/declaration/KYC, non-recording of transactions on Blockchains to save costs etc, which led to 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 blow comes to Vauld at a time when the company was grappling with a liquidity crunch that led to its halting withdrawals on July 4 and suspending operations too.  On July 5, the company said that it signed an indicative agreement to be acquired by London-based crypto lender Nexo.

The company is also stuck in court proceedings after creditors issued demand letters. In July, Vauld had said that its group firm has assets worth around $330 million and liabilities worth $400 million.

The company is at present serving a three-month moratorium to decide its way out of the financial crisis and payback creditors.