Indian authorities freeze several crypto funds due to money laundering allegations

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

The financial watchdog announced it was freezing Yellow Tune’s bank balances, payment gateway balances and Flipvolt cryptocurrency exchange balances for a total of 3.7 billion rupees, or $46.4 million after determining that the company was a shell entity incorporated by two Chinese nationals who using pseudonyms. According to newspaper reports, the ED spent three days searching premises linked to Yellow Tunes.

ED unearthed 23 entities that had deposited funds into Yellow Tunes Flipvolt wallets which were further transferred out of the country. ED was sharply critical of Flipvolt’s handling of the funds. The agency said:

“Salmon KYC [Know Your Customer] norms, loose government control in allowing transfers to foreign wallets without asking any reason/declaration/KYC, failure to record transactions on Blockchains to save costs etc have ensured that Flipvolt is unable to account for the missing crypto assets . It has made no sincere efforts to trace these crypto assets.”

Citing India’s Prevention of Money Laundering Act of 2002, the ED froze funds in Flipvolt’s accounts corresponding to the sums it transferred from Yellow Tune’s wallets to foreign wallets “until complete fund trace is provided by the crypto exchange.” The ED called these funds “nothing but proceeds of crime derived from predatory lending practices.”

The attachment of the Flipvolt funds is just the latest bad news for Vauld. The Singaporean stock exchange cut staff by 30% in June and stopped withdrawals from accounts in early July. Later that month, it sought protection from its creditors in Singapore. A three-month moratorium was granted, similar to US Chapter 11 bankruptcy.

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It was reported earlier this week that the ED had frozen accounts containing $8.1 million of the funds of crypto exchange WazirX and was investigating at least nine other exchanges with ties to Chinese-backed instant loan companies. The ED noted in its latest communication that the investigation into that case is ongoing.