The ED said it had conducted searches at several premises linked to the company, Yellow Tune Technologies Pvt. Ltd, over three days starting August 8.
Flipvolt is the Indian arm of Singaporean crypto exchange Vauld, which suspend all deposits and withdrawals on its platform in June, following the collapse of the terraUSD stablecoin and its sister token Luna. In July, Vauld signed an indicative term sheet to be fully acquired by another Nexo, another crypto lender, pending due diligence.
Messages and email sent to the exchange didn’t elicit an immediate response.
The ED said its probe revealed Yellow Tune was a shell company with Chinese nationals on its board, and that funds to the tune of Rs 370 crore were deposited by 23 entities including accused non-banking financial companies (NBFC) and their fintech arms into Yellow Tune’s Indian rupee wallets.
“These amounts were nothing but proceeds of crime derived from predatory lending practices. Cryptocurrency so purchased was transferred to various unknown foreign wallet addresses,” the ED said in a statment.
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The agency said it conducted searches at various premises of Yellow Tune Technologies between August 8 and 10 to locate the owners of the company and the recipient wallets, but found them untraceable.
“It is found that this shell entity was incorporated by Chinese nationals… with the active connivance of willing CAs/CSs and the bank accounts were opened in the name of dummy directors. These Chinese nationals left India during December 2020 and later the internet banking credentials, digital signatures of dummy directors, etc were shipped abroad and used by the said Chinese nationals to launder the proceeds of crime,” the agency said.
This is the second time this month the ED has frozen the bank accounts of a crypto exchange. In a press release last Friday, it said it recently conducted searches against a director of Zanmai Labs, which owns the popular crypto exchange WazirX,and
issued an order to freeze its bank assets totalling Rs 64.67 crore.
The agency is probing at least 10 cryptocurrency exchanges for allegedly laundering more than Rs 1,000 crore identified as proceeds of crime from firms accused in the instant loan apps case,
as we reported on Thursday.
The ED said Flipvolt failed to maintain KYC records, didn’t have a foolproof due-diligence mechanism, conducted no checks on the source of depositors’ funds, and didn’t raise any suspicious transaction reports (STRs), thereby helping the accused NBFCs launder money. The agency also said the exchange failed to cooperate with the probe despite repeated requests.
“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, has ensured that Flipvolt is not able to give any account for the missing crypto assets. It has made no sincere efforts to trace these crypto assets,” the statement read.
“By encouraging obscurity and having lax anti-money-laundering norms, it has actively assisted Yellow Tune in laundering the proceeds of crime worth Rs 370 crore using the crypto route. 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,” it added. The agency said it has managed to trace Rs 2.31 crore of Yellow Tune’s assets so far.
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