FIU begins investigating Exchange security failures

Nearly seven months later, Wazirx, one of India’s biggest cryptocurrency exchanges, is undergoing intense scrutiny as the Financial Information Unit (FIU) was ordered to investigate a platform for fraud and security failures. The directive, issued by India’s Ministry of Finance on February 14, 2025, comes months after Wazirx suffered a 2000 crore hack, bringing over 4,500 crores to risky user funds.

The government cracks down on cryptography irregularities

The investigation follows a formal complaint filed with the Ministry of Finance, which prompts Sri Kailash Chand Joshi to escalate the issue under the secretary (law). Official documents are currently left to the FIU, revealing the full scope of Wazirx’s alleged misconduct. The move shows stricter enforcement in India’s crypto sector as regulators aims to crack down on financial misconduct and protect investors’ interests.

Hacks will cause huge losses to investors, with nearly 43% of users likely losing their funds, and research reveals complex hacking techniques and potentially internal vulnerabilities. Wazirx is working with the authorities, but has yet to provide a clear solution to affected users.

Money laundering claims and Binance connections

However, authorities have raised serious concerns about Wajirux’s failure to comply. Reports suggest that the platform may have encouraged money laundering for fintech companies by failing to perform appropriate KYC (knowing customers) checks and maintaining bank account records. The Enforcement Bureau (ED) criticised Wazirx for weak transaction control, particularly in Binance’s transactions.

In addition to that trouble, the July 2024 exchange’s major security breaches linked to the North Korean Lazarus group, but experienced major flaws in operational safeguards. The investigation revealed inconsistencies between transactional data and insufficient wallet security, further increasing questions about the integrity of the platform.

Will Wazirx executives face legal consequences?

Speculation is growing that increasing evidence could lead to Wajirux co-founders Nishkar Shetty and Key Associates facing criminal charges. If a FIU investigation confirms economic fraud, serious legal consequences, including potential prison time, could continue.

This case is poised to become a groundbreaking moment in India’s crypto regulations. If fraud is proven, it could lead to stricter rules, stricter surveillance, and more accountability for exchanges operating within the country. The industry is currently attracting attention as the FIU findings could reshape the Indian digital assets regulatory scene.