Indian authorities freeze more crypto funds over money laundering allegations

Regulation

India’s Directorate of Enforcement (ED) announced Friday that it has frozen the financial accounts of Bengaluru-based financial services company Yellow Tune Technologies, some of which were held by Flipvolt crypto exchange, the Indian branch of Singaporean Vauld. The move is linked to an ongoing investigation into money laundering by China-linked instant loan companies. This is the second time this week the agency has taken action in the crypto sphere in connection with that case. 

The financial watchdog announced it was freezing Yellow Tune’s bank balances, payment gateway balances and balances in the Flipvolt cryptocurrency exchange for a total of 3.7 billion rupees, or $46.4 million after determining that the company was a shell entity incorporated by two Chinese nationals using pseudonyms. According to newspaper accounts, the ED spent three days searching premises associated with Yellow Tunes.

The ED uncovered 23 entities that had deposited funds into Yellow Tune’s Flipvolt wallets that were further transferred out of the country. The ED was sharply critical of Flipvolt’s handling of the funds. The 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.”

Citing India’s Prevention of Money Laundering Act of 2002, the ED froze funds in Flipvolt’s accounts equivalent to the sums it transferred from Yellow Tune’s wallets to foreign wallets “till complete fund trail is provided by the crypto-exchange.” The ED called those funds “nothing but proceeds of crime derived from predatory lending practices.”

The attachment of the Flipvolt funds is just the latest bad news for Vauld. The Singaporean exchange cut its staff by 30% in June and halted withdrawals from its accounts at the beginning of July. Later that month, it sought protection from its creditors in Singapore. It was granted a three-month moratorium, which is similar to U.S. Chapter 11 bankruptcy.

Related: Singapore’s financial watchdog pushes back against Terra and 3AC associations

It was reported earlier this week that the ED had frozen accounts holding $8.1 million of the funds of crypto exchange WazirX and was investigating at least nine more exchanges with ties to Chinese-backed instant loan companies. The ED noted in its latest communique that its investigation of that case is ongoing.

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