Yogesh K Porwar
The Directorate of Enforcement (ED),Bengaluru Zonal Office, has conducted searches at three premises in Bengaluru linked to cryptocurrency exchanges CoinDCX and Delta Exchange on November 4 and 5 over alleged large-scale violations of the Foreign Exchange Management Act (FEMA), 1999,involving unauthorised cross-border transactions worth thousands of crores of rupees.
The searches were conducted under Section 37 of FEMA following allegations that the platforms were routing Indian customers’funds through stablecoins such as USDT to foreign-based cryptocurrency trading platforms to facilitate derivatives trading in crypto tokens and tokenised stocks of overseas companies.
The investigation centres on M/s Neblio Technologies Private Limited, which operates CoinDCX,and M/s Excelium Technologies Private Limited, which operates Delta Exchange India.
The ED alleged that the platforms were offering futures and options in cryptocurrency tokens and trading in tokenised stocks of foreign companies without the necessary authorisation.
According to the ED,the platforms were openly advertising products such as trading in US stock futures, including exposure to shares of companies such as Apple, Google and Tesla.
CoinDCX allegedly routed customer funds through foreign exchanges.
The searches at CoinDCX allegedly revealed that the platform was offering spot trading in cryptocurrencies, futures and options in crypto tokens,and trading in tokenised stocks of foreign companies.
The ED said its investigation had uncovered a mechanism through which customers’ money deposited in Indian rupees was converted into USDT and transferred to overseas cryptocurrency exchanges, including Binance, KuCoin and Gate.io, to execute trading orders.
CoinDCX,in turn,allegedly executed these transactions on foreign cryptocurrency exchanges such as Binance, KuCoin, Gate.io and Bybit.
The agency said the volume of such cross-border transactions was estimated to be several thousands of crores of rupees.
Investigators also found that Delta Exchange India had allegedly transferred hundreds of crores of rupees to its associate entities located overseas.These transactions are currently under investigation.
Possible violations of securities and banking laws
Apart from the alleged FEMA violations,the searches revealed that the fintech products offered by the two platforms could also be contrary to the regulatory framework under the Securities Contracts (Regulation) Act, 1956, the SEBI Act,1992,and the RBI Act,1934.
The ED said these aspects were being examined separately.Further investigation is under way.
