Mumbai: The Enforcement Directorate (ED) has conducted searches at three premises in Bengaluru linked to cryptocurrency exchanges CoinDCX and Delta Exchange over alleged large-scale violations of the Foreign Exchange Management Act (FEMA), with cross-border transactions involving spot trading, futures and options in crypto tokens, and tokenised stocks of foreign companies running into thousands of crores of rupees, allegedly without the requisite authorisation, officials said on Friday.
CoinDCX And Delta Exchange Under FEMA Investigation
The searches were conducted on November 4 and 5 by the ED's Bengaluru Zonal Office under Section 37 of FEMA, 1999. The investigation was initiated following information alleging large-scale FEMA violations by Neblio Technologies Private Limited, which operates CoinDCX, and Excelium Technologies Private Limited, which operates Delta Exchange India. The agency is probing alleged unauthorised cross-border financial transactions carried out through the two platforms.
According to the ED, both platforms offered customers spot trading in cryptocurrencies, futures and options in crypto tokens, and trading in tokenised stocks of foreign companies, including Apple, Google and Tesla, despite allegedly not being authorised to offer such products.
The agency's searches revealed that customer funds deposited in Indian rupees were converted into USDT (Tether), a stablecoin, and routed to overseas cryptocurrency exchanges, including Binance, KuCoin, Gate.io and Bybit, to execute trades. The transactions were allegedly routed through an account opened in the name of a Costa Rica-based entity, which the ED suspects was a paper entity. However, the actual transactions were being executed directly through CoinDCX's application programming interfaces (APIs), the agency alleged.
Customer Funds Allegedly Converted Into USDT And Routed Overseas
The ED said the volume of such cross-border spot trading transactions ran into thousands of crores of rupees.
In futures and options (F&O) trading, CoinDCX allegedly executed customer orders on overseas cryptocurrency platforms through a similar arrangement. It opened corresponding positions on foreign exchanges in a 1:1 ratio against customer orders through an account held in the name of the Costa Rica-based entity. The transactions were executed through APIs, with settlements taking place on the foreign platforms when customers closed their positions. The volume of these transactions also ran into thousands of crores, the agency alleged.
ED Flags Trading In Tokenised Apple, Google And Tesla Stocks
The searches further revealed that CoinDCX facilitated trading in tokenised stocks of foreign companies through Hyperliquid, a foreign-based decentralised cryptocurrency platform. Customer funds were allegedly converted into USDT and used to open corresponding positions on the overseas platform, with the trades settled there. The ED said the volume of such cross-border transactions also ran into thousands of crores of rupees.
The ED further found that CoinDCX maintained enterprise trading accounts with foreign cryptocurrency exchanges, where crypto assets were allegedly held in violation of FEMA provisions. The agency also alleged that the company paid hundreds of crores of rupees in transaction fees to overseas cryptocurrency platforms through USDT, bypassing the prescribed FEMA framework.
In the case of Delta Exchange India, operated by Excelium Technologies Private Limited, the ED alleged that a large volume of its futures and options trades in crypto tokens, as well as transactions in tokenised stocks of foreign companies, was being routed through CoinDCX. CoinDCX, in turn, executed these transactions on overseas cryptocurrency exchanges, including Binance, KuCoin, Gate.io and Bybit, allegedly in violation of FEMA provisions. The volume of such cross-border transactions was found to run into several thousand crores of rupees, the agency said.
The searches also revealed that Delta Exchange India had transferred hundreds of crores of rupees to its associate entities based overseas, with the nature and purpose of these transfers being investigated by the ED.
The agency further said that the fintech products offered by both platforms appeared, prima facie, to be contrary to the regulatory provisions of the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, and the RBI Act, 1934. These aspects are being examined separately, the agency said.
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