assets of vauld froze by indian authorities

The Indian subsidiary of the demised Singaporean crypto exchange Vauld has had its assets frozen by the country’s authorities after being accused of facilitating money laundering activities for a total of 23 entities.

According to a statement from the Directorate of Enforcement (ED), the Vauld-owned crypto exchange Flipvolt Technologies received deposits of approximately 3.7 billion Indian rupees (around $46.5 million) that are considered “proceeds of crime derived predatory lending practices”.

Flipvolt is being accused by authorities of facilitating these transactions for an entity called M/s Yellow Tune Technologies Private Limited and its subsidiaries due to its “lax KYC [know-your-customer] norms”. In addition, the Directorate stated that the firm did not use any enhanced due diligence mechanisms (EDD) to figure out where the money came from.

“Flipvolt Crypto-exchange failed to give the complete trail of crypto transactions made by M/s Yellow Tune Technologies Private Limited. Nor could it supply any form of KYC of the opposite party wallets”, the statement emphasized.

Moreover, the regulatory agency said that Flipvolt has not made “sincere efforts” to trace the assets mentioned in the claim and this has led authorities to conclude that the exchange “actively assisted” the criminals in laundering money through its platform.

Vauld Denies the ED’s Accusations

Vauld has denied these accusations by stating that they follow “strict KYC requirements in every country” and that they are seeking legal counsel to take the “best course of action” to protect customers’ assets.

The crypto trading platform stated that the ED requested documents and information from the company in July 2022 and that they complied with the summon. Despite its alleged cooperation with authorities, the Directorate still decided to freeze the platform’s assets on allegations that they assisted Yellow Tune in its criminal activities.

“It is unfortunate that, despite extending our cooperation, the Enforcement Directorate has proceeded to pass a freezing order, pursuant to which crypto assets in the pool wallets of the company have ordered to been frozen to the extent of approximately Rs 204 crore”, Vauld stated in a blog post.

It added: “The freezing order of the Enforcement Directorate is specific to that one customer that availed our services for a brief period of time, whose account we subsequently deactivated. We respectfully disagree with the freezing order”.

Money-Laundering Accusations Threaten to Derail Nexo’s Acquisition of Vauld

This recent incident could jeopardize the company’s acquisition by Nexo as it is taking place within the 60 days established by the firm to perform adequate due diligence on Vauld’s operations and finances before moving forward.

On 4 July this year, Vauld abruptly halted all withdrawals and transfers after disclosing that customers took out nearly $200 million in assets from the platform shortly after the collapse of the Terra ecosystem.

According to court documents, Vauld had staked around $28 million in UST when the stablecoin imploded while several debtors defaulted on the loans they received from the platform during the crypto winter.

Only a day after Vauld paused all withdrawals, Nexo indicated that it had signed a term sheet with Vauld for the acquisition of 100% of its business as part of an effort to accelerate its growth in the Asian region.

Nexo has not commented on this recent incident and has not provided any updates in regards to the due diligence procedure it is conducting.

In late July, The Block also reported that Vauld owed approximately $402 million to creditors including $363 million owed to retail investors according to information revealed in an affidavit sent to the High Court of Singapore.

Meanwhile, the Chief Executive Officer of the beleaguered exchange, Darshan Bathija, told the media outlet that the company had assets of approximately $330 million despite the court’s filings indicating a lower balance of $287.7 million as the affidavit did not include bank deposits.

As a result, Vauld could have a $70 million hole in its balance sheet that Nexo would have to make up for if it goes through with the acquisition.

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