Mumbai cryptocurrency king’s Binance account frozen over drug case

An account belonging to Makarand Pardeep Adivirkar was shut down by Binance, one of the largest cryptocurrency exchanges in the world, following a request from the Narcotics Control Bureau (NCB), as per a report in the Economic Times. Adivirkar, arrested in June, has been accused of using cryptocurrencies to facilitate transactions to procure drugs from the dark web, the report added. 

The agency had filed a plea under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (SAFEMA), to freeze the account because it was used to buy LSD, a psychotropic substance, via bitcoin reportedly last year, according to ET. It was reported that the accused was buying drugs on behalf of local peddlers who would pay him cash.

NCB then wrote to WazirX, after the arrest seeking the wallet and trading exchange details, which informed the agency that they were bought over by Binance in 2017, ET reported. It was after NCB wrote to Binance that the account was frozen subsequently.

The case is a sober reminder of the perils of not introducing regulations in the burgeoning crypto ecosystem. This is the first case in India where a government agency has managed to freeze the account held by an exchange, ET wrote in its report.

WazirX’s run-ins with law enforcement

This is not the first time that WazirX has been under the scanner of law enforcement agencies. WazirX received a total of 377 government requests in the six-month period from April to September this year according to a disclosure report released by the exchange. It revealed that the firm had received 339 requests from India, and 38 from foreign law enforcement agencies. All requests were related to criminal proceedings, and WazirX informed that it complied with all such requests.

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One of the notable incidents saw Enforcement Directorate issuing a show-cause notice to WazirX in June this year under the Foreign Exchange Management Act (FEMA), 1999, for alleged transactions involving cryptocurrencies worth Rs 2,790.74 crore. 

The agency said that it initiated the FEMA investigation because of its probe into Chinese-owned illegal betting applications. ED allegedly found that Chinese nationals had laundered proceeds of crime worth Rs 57 crore by converting the INR into cryptocurrency Tether (USDT).

An ED statement said that WazirX Clients could allegedly transfer ‘valuable’ crypto-currencies to any person irrespective of their location and nationality without any proper documentation whatsoever, making it a safe haven for users looking for money laundering/other illegitimate activities.

Is it time for the judiciary to step in?

A public interest litigation (PIL) before the Bombay High Court argues that the unregulated crypto business infringes on the rights of the investors as there is no grievance redressal mechanism established under law, according to a copy of the document reviewed by MediaNama. The PIL was filed by lawyer Aditya Pradip Kadam who has been a crypto investor since 2018.

It alleges that the government and “its functionaries have failed to enact appropriate regulations to protect the interests of the citizens”. 

“There is an imminent threat of rise in the number of Money Laundering Cases, Illicit trade of Drugs, Terror Financing by trade of crypto currency which the Respondents (Indian government) have failed to curtail,” reads the PIL. 

The government, however, might be introducing a bill on crypto regulations in the upcoming winter session of the Parliament and will seek approval from the Cabinet before the session commences towards the end of November.

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