India’s Financial Intelligence Unit (FIU) is ramping up its investigation into potential misuse of cryptocurrency platforms for terror-related financing.
The probe focuses on suspicious wallet activity that allegedly connects digital asset transactions between India and Pakistan, particularly through platforms like WazirX and Binance.
Officials close to the investigation told Money Control that multiple unregulated wallets have been flagged for receiving funds from addresses based in Pakistan.
These wallets operate outside of traditional exchange oversight, making it difficult for enforcement agencies to trace the ultimate recipients of the funds.
The concern is heightened by the volume of transactions originating in or near sensitive border areas such as Jammu and Kashmir, where illicit cross-border financial activity has historically posed a challenge to national security.
Affidavit Alleges TRX Transfers to ISIS-Linked Entities
The case gained further attention following a detailed affidavit filed with Singapore’s High Court. The 72-page document, submitted by businessman Romy Johnson, alleges that wallets controlled by Indian crypto exchange WazirX facilitated transfers of TRON (TRX) tokens to an entity with suspected ties to ISIS in Syria.
This affidavit is set to be a central piece of evidence in an upcoming hearing scheduled for July 15, potentially expanding the scope of legal action against the exchange.
The allegation, if proven, could mark one of the most serious terror-financing cases linked to a mainstream crypto platform in India.
WazirX Faces Pressure from Users and Regulators Alike
Beyond the national security aspect, WazirX is under fire from its own user base. Customers are raising concerns about the platform’s lack of transparency regarding its reserves and internal financial practices.
Critics have pointed to the absence of public wallet signatory information and a failure to release audited Proof of Reserves, which many consider essential for accountability in the wake of high-profile crypto failures globally.
In addition, users are demanding explanations for ₹1,284 crore in questionable transactions. This figure includes ₹364 crore in transfers between related-party accounts and ₹920 crore in platform-generated revenue that remains unaccounted for.
The platform’s parent company, Zettai, also finds itself in legal jeopardy. A previous restructuring plan submitted to the Singapore High Court was dismissed after it was revealed that the company created a Panama-based subsidiary without proper disclosure.
The court also flagged the mingling of hacked and unhacked user funds, an act that may constitute a breach of fiduciary and trust responsibilities.
Binance Cooperates as Regulatory Landscape Evolves
While Binance has not been directly accused of wrongdoing in this matter, it has been providing data to Indian authorities to assist in identifying wallet owners involved in the flagged transactions. Binance previously distanced itself from WazirX in a public dispute over ownership and operational control, which may work in its favor as regulators expand their investigation.
The FIU’s scrutiny comes as India begins to formalize its approach to crypto oversight, especially around cross-border activity and KYC compliance. In recent months, the Indian government has signaled a more assertive posture toward global exchanges that operate without clear regulatory alignment.
What This Means for India’s Crypto Future
The outcome of this investigation could set a defining precedent for the Indian crypto industry. If authorities confirm links between digital asset platforms and terror financing, it may trigger tighter compliance laws and more stringent KYC enforcement.
With crypto now intersecting national security concerns, regulatory tolerance may narrow. Exchanges failing to meet operational transparency standards or lacking regulatory licenses could face restrictions, delistings, or even criminal proceedings.
Conclusion
As the line between financial innovation and geopolitical risk continues to blur, India’s crypto exchanges are facing a new level of accountability.
The FIU’s investigation into WazirX and the broader implications for cross-border crypto use could reshape how digital assets are regulated, monitored, and trusted in the world’s most populous democracy.
