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WazirX Received 828 Requests From Indian, International Law Enforcement Agencies During April-September

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By Press Trust of India | Updated: 28 November 2022

WazirX has received 828 complaint requests from the US Federal Bureau of Investigation (FBI), Interpol, among other international agencies, and Indian law enforcement agencies such as the National Investigation Agency (NIA), Enforcement Directorate (ED), and Central Bureau of Investigation (CBI), according to the cryptocurrency exchange. The requests were received against a total of 10 million transactions during April-September 2022. The exchange maintained its record of a 100 per cent compliance rate for all 828 requests received from Law Enforcement Agencies (LEA), said a report released by WazirX.

The exchange on Monday released the third edition of its Transparency Report. According to the report, only 0.008 per cent of all transactions during this period were reported or investigated by law enforcement agencies. Out of 828 queries received, 764 were by Indian law enforcement agencies, whereas the foreign agencies made 64 requests.

The greatest number of requests came in from regulators and law enforcement agencies in Maharashtra, it said. Illegal fund transfers, crypto scams, cheating, and forgery were the most common types of crimes reported, resembling scams in the traditional financial sector.

Over 700 accounts were blocked during this period. The majority of them were due to requests that came in from users.

In its continued effort to provide transparency to users and safeguard their assets, it launched the third edition of the Transparency Report.

The report highlights the company’s initiatives in boosting awareness about Web3, assisting law enforcement in identifying bad actors and implementing a full-proof onboarding process to ensure the security of users.

“We have also outlined some common trends observed in crypto scams over this time period which users should be aware of,” it said.

Some of the Indian and Foreign Law Enforcement Agencies that WazirX has worked with during this period are: the National Investigation Agency, Enforcement Directorate, State Cyber Crime Cells, Intelligence Fusion & Strategic Ops (IFSO) Delhi, Special Task Force, Narcotics Control Bureau, Bhopal Police, Crime Branch and CID, Toronto Police Department, Federal Bureau of Investigation (FBI), German Police Agencies, United Kingdom Police, Interpol, Dutch Police, Austrian Police, Europol, etc.

“We still have some way to go to prevent security risks in crypto. The level of awareness around crypto needs to extend to its ill uses too. Only then can mainstream adoption take place in an environment of trust. We will continue our efforts to educate Indians about crypto, and comply with regulators to ensure any form of fraud with virtual digital assets is tackled,” Nischal Shetty, CEO and Founder at WazirX.

According to the report, around 40 per cent of the scams are happening in Ponzi schemes and social engineering scams, 34.7 per cent of cases of Impersonation type, 21.1 per cent of cases are in Phishing / Airdrop Scams and 4.2 per cent are in other categories.

As per the report, in a recent case, a Bitcoin racket being run from Delhi came to the notice of the CBI on being alerted by the Austrian police. Imposters posed as Europol officers and other law enforcement agencies to tell their victims that their identities had been stolen and used for narcotics businesses. The criminals would target foreign nationals for the same. WazirX’s legal team, with assistance from Chainalysis, collaborated with the CBI on this case to block the operation. They identified the accounts which were being used to carry on this racket and blocked the withdrawal of the assets that were gained from the criminal proceedings.

In one of the first disproportionate asset cases involving crypto, WazirX helped Bhubaneswar Police identify the crypto accounts of an engineer who did not reveal his investments in Digital Assets. Upon scrutiny by the team, it was discovered that he had 50-odd crypto wallets and an investment worth Rs. 2 crores.

In another incident, the legal team assisted the Kolkata police in nabbing criminals who were defrauding people through a mobile gaming platform. In this case, a large sum of money was collected from the public via the platform called e-nuggets. The culprits then disabled the withdrawal of money and also removed all data from the app. WazirX helped ED freeze crypto assets worth Rs 12.83 Crores.

A few months ago, a group of criminals from Ghaziabad, Uttar Pradesh, created an elaborate fake trading app to lure customers and dupe them of huge sums of money. WazirX assisted the Ghaziabad Police real-time in identifying the identities that were linked to the culprits which led to their arrest.

In Bandra, Mumbai (Maharashtra) the WazirX team helped identify wallets linked to Chinese loan apps which were used to dupe people through fraudulent transactions. The team worked closely with the law enforcement agency to identify the accused and block their operations using crypto.

WazirX cooperated with the investigators by providing them with all the necessary details, information, and documents of the alleged accused companies who used the WazirX platform. After an in-depth internal investigation, WazirX noticed that most of the users whose information was sought by ED were already identified as suspicious by WazirX internally and were blocked in 2020-2021. Due to the active cooperation extended by WazirX and active Anti-money laundering (AML) checks, suspected users were identified.

WazirX also modified the procedure to raise a Law Enforcement request. To submit a Law Enforcement request under relevant provisions of law, the requester must be a law enforcement agent or government official authorized to Gather evidence in connection with an investigation or Make a formal law enforcement request.

They can send an email to legal@wazirx.com from the official email ID of the law enforcement agency along with a duly authorized written request.

WazirX has continued its association with TRM Labs, a virtual digital asset compliance platform, to sustain and scale up its efforts of security. It also collaborated with Chainalysis, a platform to analyze blockchain data. WazirX also joined hands with other industry players in the country to form a new crypto advocacy group called Bharat Web3 Association (BWA).

WazirX launched a course on Blockchain Technology to educate individuals. This was in collaboration with Gurukula Kangri in Haridwar, a deemed-to-be university, as per the University Grants Commission (UGC). Since its initiation, the course has seen more than 20,000 enrolments. We recently awarded the completion certificate to over 400 individuals. 7.4 per cent of them were females. Uttar Pradesh saw the highest number of enrolments in the program (25.4 per cent) among all participating states.

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Britain to Set ‘Robust’ Standards With First Regulations for Crypto Assets, Minister Says

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Britain will introduce rules for financial intermediaries, which facilitate transactions, and custodians, which store customer assets.
By Reuters | Updated: 1 February 2023

Britain’s finance ministry plans “robust” regulations for crypto assets, following the collapse of crypto exchange FTX last year, which left millions of people nursing billions of dollars in losses.

Crypto is currently unregulated globally, with firms only having to carry out checks to prevent money laundering. However, Britain’s Financial Conduct Authority (FCA) has said that more than 80 percent of license applicants were unable to show they could do this properly as “dark money” flows through the sector.

The draft rules, to be published on Wednesday, would ensure robust, transparent, and fair standards, consistent with the approach to traditional finance, Financial Services Minister Andrew Griffith said in a statement on Tuesday.

“We remain steadfast in our commitment to grow the economy and enable technological change and innovation – and this includes cryptoasset technology,” Griffith said.

The new rules come after rising interest rates led to a string of bankruptcies in the sector in 2022, wiping $1.4 trillion (roughly Rs. 11.5 crores) off the value of the crypto market. The price of Bitcoin, the most widely traded coin, plunged 60 percent.

The market rout shook confidence in cryptocurrencies, though interest in the underlying technology, most commonly known as blockchain, for other uses like payments remains.

There will be a three-month public consultation on the new plans, followed by proposals for detailed rules from the FCA.

The ministry said its approach would mitigate the most significant risks in the sector.

“These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents – ensuring crypto exchanges have fair and robust standards,” the ministry said.

There will be rules for financial intermediaries, which facilitate transactions, and custodians, which store customer assets.

The failure of FTX and other exchanges triggered calls for regulation of the industry to protect investors. Regulators are focusing on prising open “crypto conglomerates” which combine activities like trading, lending and custody under one roof, but with traditional regulatory safeguards between them absent.

The European Union is already finalising its first set of crypto rules.

Firms already authorised by the FCA would be temporarily allowed to issue their own promotions, while the new regulatory regime is being introduced, the ministry said.

© Thomson Reuters 2023

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My Big Coin Founder Gets 8-Year Jail Term for Crypto Fraud, Ordered to Pay $7.7 Million

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US federal prosecutors had urged the court to impose a 13-year prison term on My Big Coin founder Randall Crater.
By Reuters | Updated: 1 February 2023

The founder of a defunct cryptocurrency business was sentenced on Tuesday to more than eight years in prison for defrauding investors and customers out of millions of dollars by marketing a virtual currency called My Big Coin with lies and half-truths.

Federal prosecutors had urged US District Judge Denise Casper in Boston to impose a 13-year prison term on Randall Crater to send a message to others in the first sentencing of a cryptocurrency company founder for marketing fraud.

While Casper concluded that that request went too far, she rejected Crater’s contention that a 30-month prison term was sufficient to punish him for his false claims, including that My Big Coin was a real cryptocurrency backed by gold.

“Certainly cryptocurrency is a newer enterprise, a newer market, a 21st Century market,” Casper said. “But the scheme at its core was age-old, and that was fraud.”

Crater, who was sentenced to 100 months in total and ordered to forfeit nearly $7.7 million (roughly Rs. 63 crore), is expected to appeal. In court, he apologized but said he never meant to defraud anyone.

“I did not set out to steal money from anyone,” he said. “That does not mean I am not remorseful.”

A jury in July found Crater, 52, guilty of committing wire fraud and making unlawful monetary transactions in a prosecution that spilled out of a precedent-setting case by the US Commodity Futures Trading Commission.

The CFTC’s 2018 lawsuit against Crater and his failed company, Nevada-based My Big Coin, led to one of the first court rulings holding that a virtual currency could be considered a commodity within the regulator’s jurisdiction.

Prosecutors subsequently secured Crater’s indictment in 2019 and accused him of causing investors and customers to lose $7.5 million (roughly Rs. 61 crore) from 2014 to 2017 with lies about My Big Coin, whose name sounded similar to the popular virtual currency bitcoin.

Prosecutors said those false claims included that My Big Coin was a real virtual currency, was backed by gold, and had a partnership with MasterCard. Prosecutors said he used the money to buy cars, jewelry, artwork and antique coins.

© Thomson Reuters 2023

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Sam Bankman-Fried’s Bail Guarantors Should be Named, US Judge Rules

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Sam Bankman-Fried's Bail Guarantors Should be Named, US Judge Rules
By Reuters | Updated: 31 January 2023

A US judge on Monday said the names of two people who helped guarantee bail for indicted FTX cryptocurrency exchange founder Sam Bankman-Fried should be made public, but put his ruling on hold pending an expected appeal.

US District Judge Lewis Kaplan in Manhattan ruled in favour of several media outlets including Reuters that sought the names.

The judge said that while the public had only a “weak” right to know who Bankman-Fried’s guarantors were, it outweighed Bankman-Fried’s arguments for confidentiality, including that the guarantors’ safety could be imperilled.

Kaplan also said the names will remain under seal until at least February 7, because “the question presented here is novel and an appeal is likely.” A spokesman for Mark Cohen and Christian Everdell, who represent Bankman-Fried, declined to comment. Bankman-Fried, 30, has been confined at his parents’ home in California, after pleading not guilty to fraud for allegedly looting billions of FTX customer dollars.

His parents, both professors at Stanford Law School, had co-signed a $250 million (roughly Rs. 2,041 crore) bond for their son, with two other guarantors required to sign $500,000 (roughly Rs. 4 crore) and $200,000 (roughly Rs. 1.6 crore) bonds.

Bankman-Fried’s lawyers said the parents had been harassed and received physical threats since FTX’s November collapse and bankruptcy, and there was “serious cause for concern” the additional guarantors might suffer similar treatment.

Kaplan disagreed, noting that long before bail was posted, the parents had faced “intense public scrutiny” over their relationship with their son, who was once worth an estimated $26 billion (roughly Rs. 2 lakh crore).

“The amounts of the individual bonds — $500,000 and $200,000 — do not suggest that the non-parental sureties are persons of great wealth or likely to attract the attention of the types and volume of that to which defendant’s parents appear to have been subjected,” Kaplan wrote.

Media outlets distinguished the case from another judge’s decision not to reveal who guaranteed a bond for Jeffrey Epstein’s longtime associate Ghislaine Maxwell.

They said there was less “stigma” from being associated with Bankman-Fried than from being associated with the late sex offender. Maxwell was later convicted.

Other media seeking to identify Bankman-Fried’s guarantors included the Associated Press, Bloomberg, CNBC, CoinDesk, Dow Jones, the Financial Times, Insider, the New York Times and the Washington Post.

© Thomson Reuters 2023

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FTX Founder Sam Bankman-Fried Objects to Stricter Bail, Says Prosecutors Put Him in ‘Worst Possible Light’

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Bankman-Fried's lawyers were responding to a request by federal prosecutors that the former FTX boss not be allowed to talk with employees.
By Reuters | Updated: 30 January 2023 

Lawyers for Sam Bankman-Fried on Saturday urged a US judge not to ban the indicted FTX cryptocurrency executive from communicating with former colleagues as part of his bail, saying prosecutors “sandbagged” the process to put their client in the “worst possible light.”

The lawyers were responding to a Friday night request by federal prosecutors that Bankman-Fried not be allowed to talk with most employees of FTX or his Alameda Research hedge fund without lawyers present, or use the encrypted messaging apps Signal or Slack and potentially delete messages automatically.

Bankman-Fried, 30, has been free on $250 million (roughly Rs. 2,038 crore) bond since pleading not guilty to charges of fraud in the looting of billions of dollars from the now-bankrupt FTX.

Prosecutors said their request was in response to Bankman-Fried’s recent effort to contact a potential witness against him, the general counsel of an FTX affiliate, and was needed to prevent witness tampering and other obstruction of justice.

But in a letter to US District Judge Lewis Kaplan in Manhattan, Bankman-Fried’s lawyers said prosecutors sprung the “overbroad” bail conditions without revealing that both sides had been discussing bail over the last week.

“Rather than wait for any response from the defense, the government sandbagged the process, filing this letter at 6:00pm on Friday evening,” Bankman-Fried’s lawyers wrote. “The government apparently believes that a one-sided presentation – spun to put our client in the worst possible light – is the best way to get the outcome it seeks.”

Bankman-Fried’s lawyers also said their client’s efforts to contact the general counsel and John Ray, installed as FTX’s chief executive during the bankruptcy, were attempts to offer “assistance” and not to interfere.

A spokesman for US Attorney Damian Williams in Manhattan declined to comment.

Bankman-Fried’s lawyers proposed that their client have access to some colleagues, including his therapist, but not be allowed to talk with Caroline Ellison and Zixiao “Gary” Wang, who have pleaded guilty and are cooperating with prosecutors.

They said a Signal ban isn’t necessary because Bankman-Fried is not using the auto-delete feature, and concern he might is “unfounded.”

The lawyers also asked to remove a bail condition preventing Bankman-Fried from accessing FTX, Alameda or cryptocurrency assets, saying there was “no evidence” he was responsible for earlier alleged unauthorized transactions.

In an order on Saturday, Kaplan gave prosecutors until Monday to address Bankman-Fried’s concerns.

“The court expects all counsel to abstain from pejorative characterizations of the actions and motives of their adversaries,” the judge added.

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India Should Consider Lowering TDS Rate on Cryptocurrency Trade to Stem Flight of Capital, Users: Report

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Many exchanges have been found to exempt TDS rules in their business practice with unauthorised discretion, according to a report.
By Press Trust of India | Updated: 25 January 2023

India should consider lowering the 1 percent TDS on cryptocurrency trade as a high rate is causing a flight of capital and users to platforms in foreign jurisdictions and the grey market, a report said on Tuesday.

The ‘Impact Assessment of 1 percent TDS on VDAs’ report by Chase India and Indus Law said the crypto platforms/exchanges must also perform customer due diligence which can help uncover any potential future risk.

“The existing 1 percent TDS on crypto trade, combined with the absence of comprehensive regulations, is causing a flight of capital and users to platforms in foreign jurisdictions and the grey market,” it said.

The government, from April 1 last year, has brought in a 30 percent income tax plus surcharge and cess on transfer of virtual digital assets (VDAs), including cryptocurrencies, like Bitcoin, Ethereum, Tether and Dogecoin.

Also, to keep a tab on the money trail, a 1 percent TDS has been brought in on payments over Rs. 10,000 towards virtual digital currencies.

“The purpose of the TDS is to establish a trail of crypto transactions, and the same can be achieved by a lower TDS rate. A nominal TDS rate would also support tracking and tracing of transactions, thus aiding in tax collections if Indian investors continued to trade from Indian KYC-enabled platforms,” said the report, which came days before the 2023-24 Union Budget slated on February 1.

It also suggested that for the purpose of safety and oversight, the government must ask all crypto exchanges/platforms to conduct a detailed e-KYC authentication on all investors/traders in line with the Aadhaar rules.

In the joint report, Chase India and Indus Law also said that many exchanges have not been following the said TDS rules despite coming under the legal purview and mandate of conducting business under other Indian laws and regulations.

Many exchanges have been found to exempt this in their business practice with unauthorised discretion. This loophole has thus led to a systemic ‘grey market’ scenario of such exchanges-cum-companies from the fence of taxation, it said.

In its recommendation, the study said: “Every exchange/platform must provide and should be mandated for the submission of transaction records to the tax regulatory authority. This would help the tax authorities (CBDT) create a directory of ‘valid’ exchanges who are following the TDS norm.” The government, in a reply to Parliament, had last month said that it has collected more than Rs 60 crore as TDS for transactions in VDAs.

“In the absence of certain exchanges contributing to the tax clause, the government will miss out on a potential revenue system generated through these trade channels,” the report said.

Chase India spokesperson said: “A Self-Regulatory Organisation (SRO) can be considered to fill the regulatory gaps. It would encourage compliance, protect customer interest, and promote ethical and professional standards amongst the exchanges.” Indus Law spokesperson said, “Stringent TDS provisions are leading to non-tax compliant exchanges being used to avoid tax. Such off the radar transactions may itself be a breeding ground for financial crimes and for other criminal activities.”

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New FTX CEO Says Bankrupt Crypto Exchange Could Restart Business: Report

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FTX's native token FTT surged nearly 30 percent after the disclosure.
By Reuters | Updated: 20 January 2023

Bankrupt crypto exchange FTX is looking into the possibility of reviving its business, Chief Executive Officer John Ray told the Wall Street Journal on Thursday.

Ray, who took over the reins in November, has set up a task force to explore restarting FTX.com, the company’s main international exchange, he said in an interview with the WSJ.

The CEO also told the Journal that he would look into whether reviving FTX’s international exchange would recover more value for the company’s customers than his team could get from simply liquidating assets or selling the platform.

FTX’s native token FTT surged nearly 30 percent after the report.

“I’m glad Mr. Ray is finally paying lip service to turning the exchange back on after months of squashing such efforts!” FTX founder and former CEO Sam Bankman-Fried said in a tweet.

“I’m still waiting for him to finally admit FTX US is solvent and give customers their money back,” Bankman-Fried added.

A legal representative for FTX did not immediately respond to a Reuters request for comment.

Bankman-Fried has been accused of stealing billions of dollars from the exchange’s customers to pay debts incurred by his crypto-focused hedge fund, Alameda Research. He has pleaded not guilty to fraud charges.

The future of customer funds, however, remains unclear. Earlier this week, FTX said in a report to creditors that hackers stole about $415 million (roughly Rs. 3,369 crore) in crypto from its international and US exchanges since its bankruptcy in November.

© Thomson Reuters 2023

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