Enforcement Directorate issues notice to WazirX, directors over FEMA breach
Shrimi Choudhary | 12/06/2021 | 4 hours ago
The Enforcement Directorate (ED), in line with its current focus on crypto exchanges and money laundering, on Friday issued show-cause notice to WazirX and its directors Nischal Shetty and Sameer Hanuman Mhatre for allegedly violating foreign exchange laws involving crypto transactions of Rs 2,790 crore.
“The agency has found evidence of non-compliance with forex rules and how users are using the crypto platform to launder money. Similar action is expected against more crypto platforms and their executives this month,” said a senior official in the agency.
In the WazirX matter, the federal agency issued notice under the Foreign Exchange Management Act (FEMA) following an ongoing money-laundering probe into Chinese-owned illegal online betting applications.
“Some Chinese nationals have laundered Rs 57 crore by converting rupees into cryptocurrency Tether (USDT) and then transferring the money to Cayman Islands-registered Binance wallets based on instructions received from abroad,” according to the ED.
However, the exchange said it was yet to receive any notice from the ED.
“WazirX is in compliance with all laws. We go beyond our legal obligations by following Know Your Customer and anti-money laundering processes and have always provided information to law enforcement authorities whenever required,” it tweeted after the ED statement.
“We are able to trace all users on our platform with official identity information. Should we receive a formal communication or notice from the ED, we’ll fully cooperate in investigation. Your funds are absolutely safe on WazirX,” the exchange added.
WazirX allegedly allowed a wide range of transactions in cryptocurrencies including exchanging cryptos for rupees and the other way round. Apart from these, there are person-to-person transactions and even transfers/receipts of cryptocurrencies held in its pool accounts to wallets of other exchanges, which could be held by foreigners in locations outside India.
The exchange received cryptocurrencies worth Rs 880 crore via its pool account from Binance accounts and transferred cryptocurrencies worth Rs 1,400 crore to Binance accounts during the period under investigation.
The agency said the exchange not collecting requisite documents was a violation of anti-money laundering laws and FEMA guidelines.
The ED said none of these transactions was available on blockchain for any audit/investigation. It was found that WazirX clients could transfer “valuable” cryptocurrencies to any person, irrespective of location and nationality and without proper documentation, and facilitate those users looking to launder money.
WazirX is an India-based cryptocurrency exchange that allows its customers to trade in digital currencies such as Bitcoin, Ethereum, and Ripple.
WazirX claims to have 2 million users on its platform.
📣Antitrust case: HC paves way for CCI investigation against Amazon, Flipkart
Shivani Shinde & Neha Alawadhi | 12/06/2021 | 4 hours ago
The Karnataka High Court on Friday dismissed the petitions of e-commerce giants Amazon and Flipkart against a probe by the Competition Commission of India (CCI) for alleged violation of competition laws. The verdict will have repercussions for the entire e-commerce industry, with large players likely to face a closer scrutiny from the government, according to legal experts.
The order was pronounced by Justice P S Dinesh Kumar, who dismissed the pleas filed by Amazon Seller Services Pvt Ltd and Flipkart Internet Pvt Ltd. The case had been going on for more than a year now.
Last year, the CCI announced a probe into Amazon and Flipkart following a complaint filed by the Delhi Vyapar Mahasangh (DVM), which represents small and medium business owners in Delhi, accusing the two e-commerce giants of favouring some preferred sellers, hurting small businesses. The two companies had managed to get a stay until now.
When contacted, an Amazon India spokesperson said: “We will review the judgment carefully and then decide on the next steps.” Flipkart did not comment on the issue.
The Confederation of All India Traders (CAIT) welcomed the order. “It fully vindicates the stand of CAIT that Amazon and Flipkart’s business model is entirely based on violating the FDI policy, rules, and other laws. Therefore, without wasting any more time, the CCI should immediately begin its probe,” B C Bhartia, national president, and Praveen Khandelwal, secretary general of CAIT, said in a statement.
Legal experts say e-commerce players in general have exploited loopholes in the law.
“Effectively, the judgment means that the alleged preferential treatment mechanisms and the indirect holding structures adopted by some of the e-commerce players are now exposed to the CCI’s scrutiny, and could lead to heavy fines and penalties if any violations of law are discovered,” said Salman Waris, partner head of TMT and IP practice at Delhi-based TechLegis Advocates & Solicitors.
From an immediate legal point, both Amazon and Flipkart have the option to either go to a two-judge Bench in the high court or the Supreme Court, “but the judge’s decision has paved the way to restart the investigation, which has been on hold for more than a year”.
“In the short term, they may still be able to get interim relief, but in the long term, if the decision goes against them, the e-commerce industry could be badly shaken. There is also a new draft of the upcoming e-commerce policy that stresses e-commerce companies ensure no algorithm bias against any sellers. The policy is likely to be implemented soon, which together with this decision and the CCI probe, could have a long-term impact on the sector, which has already been adversely impacted by the Covid-19 pandemic,” said Waris.
Sonam Chandwani, managing partner at KS Legal & Associates, said: “Amazon's argument to ward off the CCI probe into alleged violations of competition law was a mere attempt to unscrupulously mislead the ED investigation. This dismissal of pleas is a welcome ruling.”
When asked about the preferential treatment to select sellers, in a recent interaction with Business Standard, Amit Agarwal, senior vice-president and country head, Amazon India, said the right kind of local retailers were already embracing technology and seeing growth.
CAIT and DVM alleged that Amazon had a direct relationship with the seller Cloudtail and was giving it preferential treatment along with another seller, Appario.
Cloudtail, one of the largest sellers on Amazon India, is owned by Prione Business Services, a joint venture between Amazon and Infosys co-founder N R Narayana Murthy’s Catamaran Ventures. Appario Retail is a subsidiary of Frontizo, which is a joint venture between Amazon and the Patni Group.
Amazon entered into these tie-ups between 2014 and 2017. However, the revised e-commerce laws restricted marketplace platforms’ shareholdings in direct retail suppliers.
Industry executives said Amazon had made these investments within the parameters of the law and it was up to the government to come up with policies to regulate such agreements.
In January this year, the Karnataka High Court started hearing the CCI probe petition again. This is a continuation of the matter after the Supreme Court declined to entertain the CCI’s petition in October and asked the HC to decide the CCI plea for vacating the stay.
In February, the CCI told the high court that the Competition Act was brought in to create a level playing field, and it wanted more players in e-commerce to promote healthy competition and better choices for consumers.
But as Amazon’s legal counsel Gopal Subramanium pointed out that the CCI’s own market study had concluded that even if the online platform had entered into exclusive agreements with sellers, they could not be called anti-competitive. Subramanium, in his earlier arguments, also said that about 756,000 sellers conducted business on Amazon’s platform and all of them could not be preferred sellers. The online retailer promotes competition with its competitive prices, he added.
📣Flipkart to pilot drone delivery of Covid-19 vaccines in Telangana
Samreen Ahmad | 12
/06/2021 | 10 hours ago
E-commerce major Flipkart has partnered with the Telangana government to lead a consortium tasked with the development and execution of the drone deliveries of medical supplies to remote areas under the ‘Medicines from the Sky’ project. The pilot, which is expected to be conducted for over six days, will be tested out for delivering thousands of Covid-19 vaccines in Hyderabad while keeping in mind all the safety and efficiency parameters.
Google-backed delivery and e-commerce firm Dunzo Digital has earlier this month announced similar drone delivery flights under the same project in Telangana.
Walmart-backed Flipkart will utilise learnings from its tech-enabled supply chain to deploy drones and enable deliveries of medical supplies. These efforts will be complemented with technologies such as geo mapping, routing of shipments and track and trace of location, developed by Flipkart over the years in serving customers.
“The Covid-19 crisis has pushed the envelope in the rapid development of scalable and robust technologies and the Medicines from the Sky project is a testament to that. It is a decisive step in making use of cutting-edge technologies for the safety and wellbeing of the masses,” said Pranav Saxena, Distinguished Product Manager at Flipkart.
According to Saxena this pilot will set the premise for the utilisation of drone systems in providing healthcare and product delivery in remote areas and even during disasters.
“Telangana has been a pioneer in using technology for improving the lives of the citizens. Using drones to deliver healthcare supplies to people in remote and inaccessible areas is a one-of-a-kind initiative ever undertaken in our country and we are happy to lead this initiative in collaboration with partners such as Flipkart,” said Jayesh Ranjan, Principal Secretary (IT and I&C), Government of Telangana.
Leveraging the Centre’s recent regulation policies for low-altitude airspace for drones and unmanned aerial vehicles, the Telangana government is exploring the scope of delivery of medical and healthcare provisions through drones across the state. The government has partnered with the World Economic Forum, government think tank Niti Aayog, and HealthNet Global for ‘Medicine from the Sky’ with the support of leaders in medicine, technology, and research.