Indian authorities freeze crypto funds over money laundering allegations
India is Directorate of Enforcement (ED) announced on 12th August that it has frozen the financial accounts of Karnataka-based financial services firm Yellow Tune Technologies, some of which were held by Flipvolt Cryptocurrency Exchange, the Indian branch of Singaporean Vauld. This move by ED is linked to an ongoing investigation into money laundering by China-linked instant loan firms. This is the second time in the week that the law enforcement agency and economic intelligence agency has taken action in the Cryptocurrency sphere in connection with that case.
The financial and economic watchdog announced that it was freezing Yellow Tune’s bank balances, payment gateway balances and balances in the Flipvolt Cryptocurrency exchange for a total of INR 3.7 billion, or $46.4 million after determining that the firm was a shell entity build up by two Chinese nationals using pseudonyms. According to newspaper reports, the ED spent around three days searching premises associated with Yellow Tunes Technologies.
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The ED exposed 23 entities that had deposited funds into Yellow Tune Technologies Flipvolt wallets that were further transferred out of the nation. The ED was sharply critical of Flipvolt is handling of the user funds. The financial agency said:
“Lax KYC [Know Your Customer] 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.”
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Citing India is Prevention of Money Laundering Act (PMLA) of 2002, the ED froze funds in Flipvolt is accounts equivalent to the sums it transferred from Yellow Tune Technologies’ wallets to foreign wallets “till complete fund trail is provided by the Cryptocurrency-exchange.” The ED called those funds “nothing but proceeds of crime derived from predatory lending practices.”
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The attachment of the Flipvolt funds is just the latest negative press for Vauld. The Singaporean Cryptocurrency Exchange cut its staff by 30% in June 2022 and halted withdrawals from user accounts at the beginning of July 2022. Later that month, it sought safety from its creditors in Singapore. Then, it was granted a three-month moratorium, which is similar to U.S. Chapter 11 bankruptcy proceedings.
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It was also reported earlier this week that the ED had frozen accounts holding $8.1 million of the funds of Cryptocurrency Exchange WazirX and was investigating at least nine more cryptocurrency exchanges with ties to Chinese-backed instant loan firms. The ED said in its latest communique that its investigation of that case is ongoing.
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