Indian crypto investors using WazirX need not be concerned about Binance’s termination of its wallet service, according to a statement issued by the crypto exchange. It argued that the allegations made by Binance in its blog are “false and unsubstantiated”.
The exchange added that it had made arrangements to ensure that its digital assets were stored in “accordance with industry-leading standards”. It added that it was taking steps to seek recourse and protect its legal rights in response to Binance’s actions.
Why it matters: WazirX is one of India’s most popular crypto exchanges which holds crores of rupees worth of assets on behalf of its users. A tussle over its ownership and the subsequent question mark over its funds is bound to make users jittery. The statement will go a long way in helping investors breathe easy.
- However, it may be prudent to revisit the ownership tussle between Binance and WazirX which came to light in 2022 and left investors concerned, while damaging the credibility of both companies.
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What has happened so far?
The chain of events between the two exchanges in the last few months may be confusing for some as both sides accuse the other of obfuscating the truth. Here is a snapshot of what has transpired so far:
So either @cz_binance was lying then (see the screenshot below) or he's lying now (see this – https://t.co/mbrlEuLRFa ) https://t.co/7wsOfLy8Mc
— Nikhil Pahwa (@nixxin) August 5, 2022
The world’s largest crypto exchange (by volume) announced that it had “acquired” India’s WazirX. It wrote on its blog that people in India can buy and sell cryptocurrencies with fiat currencies through the Binance Fiat Gateway. The move allowed Binance users to place orders on the exchange in order to purchase Tether (USDT) against INR. “This integration will allow users to trade any digital asset available on Binance.com with the purchase of USDT from the WazirX digital asset marketplace
“The WazirX acquisition and integration are part of Binance’s growing list of global partners to provide easy access and more options to people throughout regions for the purchase of cryptocurrency with fiat in a fast and secure manner,” read the post back then.
A feud broke out between Binance CEO Changpeng Ziao and WazirX’s CEO Nischal Shetty on Twitter. The feud followed on the heels of the Directorate of Enforcement’s (ED) freezing of WazirX’s funds to the tune of Rs. 64.67 crore in 2022.
Binance backs off: Ziao said that Binance did not own any equity in Zanmai Labs, the entity which operates WazirX in a thread on Twitter. He added that the exchange “acquired” WazirX in 2019 but this transaction was never completed. “Binance has never – at any point– owned any shares of Zanmai Labs, the entity operating WazirX,” read the thread. Ziao clarified that the exchange only provided wallet services to WazirX as a tech solution.
Shetty’s stance: Shetty tweeted a clarification of his own in response to Ziao’s thread and allegations made by the ED in its press release. He explained that WazirX was acquired by Binance and should not be confused with Zanmai Labs which is an Indian company owned by him and co-founders.
- “Zanmai Labs has a license from Binance to operate INR-Crypto pairs in WazirX,” read the tweet put out by Shetty. He added that Binance owns the domain name of WazirX, the root access of AWS servers, all the crypto assets and the crypto profits.
How did Ziao counter: Changpeng responded to Shetty by specifying that the company had shared access to an AWS account.
- Ziao said that Binance did not have control on operations including user sign-up, KYC, trading and initiating withdrawals’, which rested with the founding team of WazirX. “This was never transferred, despite our requests. The deal was never closed. No share transfers,” Ziao tweeted out.
Shetty’s rebuttal: Shetty clarified that processes such as user sign-ups and KYC fall within the purview of Zanmai Labs through a license obtained from Binance. Shetty added that Binance has root access to WazirX’s servers which is as good as having control over the entity.
- This was dismissed by Ziao as “deception wording games”; he also went on to urge users to move their funds from WazirX to Binance to keep them “safe”.
- “We can shut down the domain. It just hurts users. We do not have control of the trading system. You just gave the AWS login, no source code, no deployment capability. You also retained access to the AWS account, source code, deploy(ment), etc.,” Ziao told Shetty in his tweet.
- Ziao added that the company asked for transferring WazirX’s system source code, deployment, operations, in February 2022 which was refused by WazirX.
“WazirX has been uncooperative with us, and looks like uncooperative with ED as well,” Ziao quipped.
Shetty’s rebuttal: Shetty charged that he asked the Binance team to clarify the parent entity of Binance as the deal to sell Zanmai Labs involved this entity.
- “We were given an ambiguous answer that (the) parent entity is under restructuring. It’s been many months, still waiting for Binance Parent entity,” Shetty tweeted.
- Shetty revealed that he has all the legal documents to prove that Binance controls all crypto-to-crypto trading and crypto deposits and withdrawals on the platform in an interview with Moneycontrol.
What was the fallout then: Patrick Hillmann, Chief Communications Officer, Binance, announced that the world’s largest exchange (by volume) is removing the off-chain fund transfer channel between WazirX and Binance from August 11, 2022 to provide “clarity and protection for users”.
- Update to the blog: Binance updated its blog post from 2019 by stating that the acquisition was limited to an agreement to purchase certain assets and intellectual property of WazirX. It did not involve any equity in Zanmai Labs.
ED’s allegations: Many seem to think that Binance washed its hands off WazirX after the Directorate of Enforcement alleged that Zanmai Labs created a web of agreements with Crowdfire (US), Binance (Cayman Islands), and Zettai Pte Ltd. (Singapore) to obscure the ownership of the crypto exchange.
- “They are giving contradictory & ambiguous answers to evade oversight by Indian regulatory agencies,” read the release then.
- The agency lifted the freeze on WazirX’s bank accounts on September 12, 2022. The company clarified that it had no association with any of the accused entities which were under ED’s scanner. The exchange added that its platform may have been misused by these entities.
WazirX was forced to transfer its assets to multi-sig wallets after Binance decided to terminate its wallet services to the Indian exchange, according to a tweet put out by the exchange.
- The Indian exchange was forced to initiate this transfer following Binance’s warning on January 26, 2023 in which it urged Zanmai Labs (the entity behind WazirX) to retract “false public statements” or terminate the use of its wallet service.
- Binance added that Zanmai refused to retract their “misleading statements” which is why WazirX had time till February 3, 2023, to remove funds from the accounts used for WazirX’s operations.
- The company also termed these “false claims” an attempt to shift the responsibility over WazirX’s operations to Binance, while clarifying that they are working with Zanmai to ensure that the withdrawal of remaining assets continues without any hindrance after February 3, 2023.
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