Indian Authorities Freeze More Crypto Funds Amid Money Laundering Allegations

Indian Authorities Freeze More Crypto Funds Amid Money Laundering Allegations

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

The Financial Watchdog announcement it froze Yellow Tune bank balances, payment gateway balances and Flipvolt cryptocurrency exchange balances totaling 3.7 billion rupees, or $46.4 million after determining that the company was a fictitious entity formed by two Chinese nationals using pseudonyms. According to newspaper accounts, the ED spent three days searching for locals associated with Yellow Tunes.

The ED uncovered 23 entities that had deposited funds into Yellow Tune’s Flipvolt wallets which were then transferred out of the country. The ED strongly criticized Flipvolt’s handling of the funds. The agency said:

“Lax KYC [Know Your Customer] standards, loose regulatory control to allow transfers to foreign wallets without asking for a reason/declaration/KYC, not registering transactions on Blockchains to reduce costs, etc., have resulted in Flipvolt not being able to report missing crypto assets. He made no sincere effort to trace these crypto assets.

Citing India’s Prevention of Money Laundering Act 2002, the ED froze funds in Flipvolt accounts equivalent to sums transferred from Yellow Tune wallets to foreign wallets “until the full trail of the funds is provided by the crypto-exchange”. The ED called these funds “nothing more than the proceeds of crime from predatory lending practices”.

The seizure of the Flipvolt funds is just the latest bad news for Vauld. The Singapore stock exchange reduced its workforce by 30% in June and halted withdrawals from its accounts in early July. Later that month, he filed for protection from his creditors in Singapore. It was granted a three-month moratorium, which is similar to Chapter 11 bankruptcy in the United States.

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

It was reported earlier this week that the ED froze accounts holding $8.1 million of funds from crypto exchange WazirX and is investigating at least nine other exchanges linked to instant lending companies backed by the China. The ED noted in its latest statement that its investigation into this matter is ongoing.