ED Conducts Searches At CoinDCX, Delta Exchange Offices Over FEMA Allegations

Cryptocurrency exchanges operating in India are subject to regulatory requirements governing their financial transactions and dealings with overseas platforms. The Enforcement Directorate (ED) has conducted searches at premises linked to CoinDCX and Delta Exchange in Bengaluru over alleged unauthorised cross-border financial transactions.

In a statement, the ED said its Bengaluru Zonal Office searched three premises linked to Neblio Technologies Pvt. Ltd., which operates CoinDCX, and Excelium Technologies Pvt. Ltd., which operates Delta Exchange, on November 4 and 5 under Section 37 of the Foreign Exchange Management Act (FEMA), 1999.

ED Alleges CoinDCX Used Overseas Exchanges For Crypto Trades

The ED said CoinDCX offered spot trading in cryptocurrencies, futures and options in crypto tokens, and trading in tokenised stocks of foreign companies. For spot trades, the agency alleged that users’ INR deposits were converted into USDT and transferred to overseas platforms such as Binance, KuCoin and Gate.io to execute orders.

These transfers were routed through an account in the name of a Costa Rica-based entity, which the ED described as a paper entity. The agency said the transactions were actually undertaken directly by CoinDCX through application programming interfaces (APIs).

For futures and options, CoinDCX allegedly opened corresponding 1:1 positions on overseas exchanges, including Binance, KuCoin, Bybit and Gate.io. The ED said these positions were closed on the foreign platforms when users closed their trades, with settlements taking place there.

The agency also alleged that tokenised stock trades involving companies such as Apple, Google and Tesla were derivative positions executed on Hyperliquid, a foreign-based decentralised crypto trading platform, rather than trades in the underlying stocks. User funds were converted into USDT to open corresponding positions.

The ED said these cross-border transactions ran into thousands of crores. It also alleged that CoinDCX held crypto assets in enterprise accounts on foreign exchanges and paid hundreds of crores in transaction fees to overseas platforms through USDT.

The agency said the platforms were offering tokenised stock products despite lacking authorisation, stating, “These platforms were openly advertising trading in tokenised stocks of foreign entities despite not being authorised to do so.”

ED Says Delta Exchange Routed Trades Through CoinDCX

The ED’s statement also named Delta Exchange India, operated by Excelium Technologies. It alleged that a large volume of the platform’s futures and options trades and tokenised stock transactions was routed through CoinDCX, which executed them on overseas exchanges.

The agency said these cross-border transactions involved several thousand crores of rupees. It also said Delta had transferred hundreds of crores to overseas associate entities, with these transactions under investigation.

The ED added that the fintech products offered by both platforms appeared, prima facie, to be contrary to provisions of the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992 and the RBI Act, 1934. These aspects are being examined further.

CoinDCX, Delta Exchange Say Operations Continue Normally

In a post on X, formerly Twitter, CoinDCX said officials visited its Bengaluru office on November 4 and that it cooperated with the authorities. The exchange said, “We operate in strict compliance with all applicable Indian laws, including FEMA (1999), and also adhere to all KYC, AML and reporting obligations.” It added that trading, deposits and withdrawals on its platform remained operational.

Delta Exchange, in a separate post on X, formerly Twitter, acknowledged the ED’s visit on November 4 and 5 and said its operations continued normally. It stated, “At Delta Exchange India, our business does not involve any cross-border transfer of VDAs in any form or manner. We operate a dedicated INR-settled exchange for Indian users only.” The exchange also said Excelium Technologies had been registered with FIU-IND since 2023 and that user funds remained secure in Indian banks.

The ED said further investigation was underway.