India's Enforcement Directorate (ED) has searched premises linked to CoinDCX and Delta Exchange India as part of an investigation into alleged customer fund flows involving USDT and overseas trading platforms. Reports published on November 12, 2026, said the searches took place on November 4 and 5 at three locations in Bengaluru under provisions of India's Foreign Exchange Management Act (FEMA).
The investigation connects crypto trading, overseas derivatives platforms, and cross-border fund movements. It also highlights Indian regulators' continued focus on foreign-exchange compliance and the movement of customer funds through digital asset services.
What Trading Arrangements Are Under Investigation?
According to information reported about the investigation, the ED suspects that customer deposits in Indian rupees were converted into USDT and routed to overseas trading venues through API connections or other arrangements. Platforms mentioned in reports include Binance, KuCoin, Gate.io, Bybit, and Hyperliquid.
The investigation also concerns an entity registered in Costa Rica and whether associated accounts were used to facilitate cross-border digital asset trading. Authorities reportedly described the transaction volumes as reaching tens of billions of rupees.
These remain allegations under investigation and should not be treated as judicial findings of wrongdoing. CoinDCX said its business continued to operate normally and emphasized its compliance position. Delta Exchange denied unauthorized cross-border transfers of virtual digital assets. Both companies said trading, deposits, and withdrawals remained available.
Why Does FEMA Apply to USDT and Overseas Crypto Platforms?
India's Foreign Exchange Management Act governs foreign exchange transactions, cross-border payments, and related capital flows. Crypto transactions may attract regulatory scrutiny when they involve funds moving overseas from Indian residents, value transfers through stablecoins, or trading through foreign accounts.
The use of USDT does not automatically make a transaction unlawful. Regulatory questions generally concern whether cross-border transfers comply with applicable rules, whether the parties have fulfilled their obligations, and whether overseas trading arrangements meet relevant legal requirements.
For platforms offering API trading, access to overseas liquidity, or derivatives services, regulators may also examine whether the actual movement of customer funds is consistent with the business model disclosed by the provider.
How Should Crypto Platforms Strengthen Cross-Border Compliance?
Crypto exchanges should maintain complete records of fiat deposits, stablecoin conversions, on-chain transfers, and overseas trading activity. Each stage should be traceable to customer identity information and a documented transaction purpose. Recording only orders executed on the domestic platform may not be sufficient to explain where customer funds ultimately go.
KYT tools can help trace USDT movements, associated wallets, and high-risk addresses, but they cannot replace foreign-exchange reporting, customer due diligence, or legal review. Businesses should also assess API partners, overseas liquidity providers, and related accounts to ensure that fund-routing arrangements comply with applicable local requirements.
The investigation is a reminder that cross-border crypto compliance risks arise not only from blockchain transactions but also from fiat conversion, overseas accounts, and the structure of trading arrangements. Strong fund-flow records and partner due diligence can help reduce regulatory and operational exposure.