India’s financial crimes watchdog raids crypto exchanges CoinDCX and Delta over alleged illegal cross-border trades

India’s Enforcement Directorate (ED), the country’s financial crimes agency, said it searched premises linked to crypto exchanges CoinDCX and Delta Exchange India over alleged unauthorized cross-border transactions and a violation of foreign exchange law.

The agency said in a post on X that on Nov. 4 and Nov. 5 it searched three premises in Bengaluru linked to Neblio Technologies, which operates CoinDCX, and Excelium Technologies, which operates Delta Exchange, under Section 37 of the Foreign Exchange Management Act, or FEMA, the 1999 law that governs how money moves in and out of the country.

CoinDCX is India’s largest crypto exchange by trading volume. Still, its 24-hour trading volume of about $700,000, according to Coingecko, is far smaller than that of its global peers. Delta Exchange India’s is smaller still.

The two exchanges mentioned the visits in X posts last week. Neither had responded to CoinDesk’s request for comment before publication time.

The ED alleged that both platforms routed customer money abroad to trade derivatives and tokenized shares of foreign firms, even though neither was authorized to do so. The ED’s X post shared an ad from CoinDCX that read “Trade in U.S. stock futures” and said trading could start with just 100 rupees ($1.05).

According to the agency, CoinDCX moved money abroad in three ways.

On spot trades in some tokens, it said the exchange converted customers’ rupees into the stablecoin USDT, a token designed to track the U.S. dollar, and sent it to foreign exchanges, including Binance, KuCoin and Gate.io, to fill the orders. The ED said this was done bypassing the framework for cross-border money transfers.

It alleged the trades ran through an account in the name of a Costa Rica-based entity, which it found to be a paper entity, and that they were in fact made straight from CoinDCX through software links known as APIs.

In futures and options, the ED alleged that CoinDCX mirrored each customer’s positions on a foreign platform, one for one. When a user opened a position on the platform, a matching position opened on Binance, KuCoin, Bybit or Gate.io, through an account in the name of a Costa Rica-based group entity, which the ED also described as a paper entity. When the customer closed the position, the foreign one was closed too, and the deal settled abroad.

The tokenized stock trading, in shares of companies such as Apple, Google and Tesla, was in fact derivatives trading on Hyperliquid, a foreign decentralized trading platform, the ED alleged. It said CoinDCX converted customers’ funds into USDT and opened matching positions there, one for one, and closed them when the customer did.

The ED put the volume of each of these three flows at tens of billions of rupees.

The directorate also said CoinDCX keeps enterprise trading accounts on foreign crypto platforms, where it holds crypto assets, in contravention of FEMA. The agency alleged that CoinDCX pays billions of rupees in transaction fees to those platforms — which are recorded as business expenses — and that routing these payments in stablecoins such as USDT contravenes the FEMA framework.

It said that Delta Exchange India offers the same set of products, spot trading, futures and options and tokenized shares of foreign companies.

Searches found that a large part of Delta’s derivatives and tokenized-share trading was actually routed through CoinDCX, which then executed the trades on foreign platforms such as Binance, KuCoin, Gate.io and Bybit, in breach of FEMA.

The ED put these cross-border transactions at several tens of billions of rupees. It is also investigating billions of rupees that Delta allegedly sent to associate entities abroad.

The ED said the fintech products offered by the two exchanges appear to contravene norms under the Securities Contracts (Regulation) Act of 1956, the SEBI Act of 1992 and the RBI Act of 1934, among other laws. It said further investigation is under way.

What exchanges say

In its X post, CoinDCX said ED officials visited its Bengaluru office on Nov. 4 as part of a routine inquiry and that it cooperated fully.

“We operate in strict compliance with all applicable Indian laws, including FEMA (1999), and also adhere to all KYC, AML and reporting obligations,” it said, referring to know-your-customer and anti-money laundering regulations. It added that trading, deposits and withdrawals remain fully operational.

Delta Exchange India acknowledged the ED’s visits and said it is operating as usual, with user funds remaining in Indian banks.

“At Delta Exchange India, our business does not involve any cross-border transfer of VDAs in any form or manner,” it said, using the abbreviation for virtual digital assets. It added that it has been registered with India’s Financial Intelligence Unit as a reporting entity since 2023.