Executives from Binance and Indian crypto exchange WazirX are locked in a public dispute over ownership of the latter firm after it became the subject of an Indian regulatory probe and had its assets frozen.
Binance acquired WazirX in 2019; however, Binance co-founder and CEO Changpeng Zhao took to Twitter (NYSE: TWTR) to claim that the transaction had never been completed and Zanmai Labs, the firm that created WazirX, still owned it.
On Twitter and in an interview with CoinDesk, WazirX co-founder Nischal Shetty attempted to refute claims made by Zhao. According to Zhao, Binance "only provides wallet services...as a tech solution." Shetty has claimed that "the technology, the product, the domain, the brand and everything was sold by our Singapore entity Zettai to Binance."
Binance has since warned WazirX users to transfer funds to its own platform and has stated that it intends to eliminate off-chain fund transfers. Off-chain transfers, transactions that occur outside of a blockchain environment, are a way for users to send funds while avoiding most or all fees that typically come with on-chain transfers.
What is WazirX in Trouble For?
According to the Enforcement Directorate's press release, the move to freeze WazirX's assets comes as part of a larger investigation into money laundering in the Indian crypto space. The investigation targets firms that enable international fintech and non-bank financial companies (such as Binance, which was noted in the release) to bypass Indian licensing regulations for lenders.
Per the ED, WazirX gave "contradictory & ambiguous answers to evade oversight by Indian regulatory agencies" and was generally uncooperative with its investigation. The agency stated that the company was "without any known office, any known employee and rarely responds to queries on legal@binance.com." The company has claimed that it lacks records on crypto transactions as well.
Who Really Owns WazirX?
Most information surrounding the spat as of the time of writing is hearsay from executives at Binance and WazirX. Unfortunately, there doesn't appear to be much in the way of hard evidence as to who owns what.
The initial deal struck in 2019 was announced in a November 20 blog post on Binance's blog, and a November 21 post on WazirX's blog. In both announcements, the firms refer to the transaction as an "acquisition," with Binance noting that WazirX's auto-matching engine would be incorporated into its own platform by Q1 2020. A second blog post in February 2020, Binance announced that it would integrate WazirX's peer-to-peer platform later that month, though no updates would follow.
Binance claim's hint at this integration never happening, with Zhao claiming that a request to transfer source code was refused as recently as February 2022. Shetty has retorted that Binance has far more control than it leads on, pointing to statements from the firm that it could "shut down" WazirX, and claiming that the company has root access to its Amazon Web Services (NASDAQ: AMZN). Zhao has confirmed that Binance has access to WazirX's AWS account and that it could shut down the domain but re-iterated a lack of access to the platform's source code.
Based on claims made by both CEOs, the transaction has likely been stuck in limbo for the past two years. The ongoing crypto winter and WazirX's investigation have likely pushed the situation to its tipping point.