The recent legal developments surrounding WazirX, one of India’s leading cryptocurrency exchanges, have cast a shadow over the prospects of its customers recovering their lost funds in full. According to the exchange’s legal advisers, it is “extremely unlikely” that WazirX customers will be made whole in crypto terms, following the $234 million hack in July 2024. This cyberattack, which wiped out approximately 45% of the platform’s customer funds, has left WazirX in a precarious financial position as it seeks to restructure its liabilities.
During a conference call with journalists, including WazirX co-founder Nischal Shetty, legal experts outlined the grim reality facing the exchange’s users. George Gwee, a director at restructuring firm Kroll, indicated that customers could face a loss of at least 43% of their holdings on the platform. In the best-case scenario, Gwee mentioned that customers might recover between 55% and 57% of their funds, a far cry from full restitution.
On Tuesday, the Singapore High Court will hear WazirX’s request for a six-month moratorium while it attempts to reorganize its finances and navigate the fallout from the devastating hack. The request was filed by Zettai, a Singapore-incorporated entity whose subsidiary, Zanmai India, operates the WazirX exchange. This legal protection is crucial for WazirX as it works to address the significant shortfall created by the cyberattack and seeks potential avenues to bridge the gap in customer funds.
Nischal Shetty, addressing the current situation, acknowledged that the figures presented by the legal team are based on the most recent data available as of Monday. He emphasized that the objective is to reduce the gap through ongoing efforts, although specifics remain uncertain as negotiations and ideation are still in progress. Shetty suggested that a clearer picture of the recovery process might emerge in the coming weeks as these efforts develop.
Kroll managing director Jason Kardachi further tempered expectations by stating that it is “extremely unlikely” that WazirX will be able to make customers whole in crypto terms. He pointed out that while any potential profits generated or contributions from third parties (so-called “white knights”) could improve the recovery rate, the reality is that the chances of fully restoring customers’ crypto holdings are slim. Kardachi also noted that an improved crypto market could allow customers to retrieve more of their investments in dollar terms, but he remained skeptical about this scenario.
The ongoing ownership dispute with Binance, the world’s largest cryptocurrency exchange, adds another layer of complexity to the situation. WazirX’s legal team, alongside Shetty, has remained tight-lipped about the details of this dispute due to confidentiality restrictions. However, the outcome of this conflict could play a critical role in determining the future of WazirX and its ability to recover lost funds.
As the situation continues to unfold, customers and industry observers alike are closely watching how WazirX navigates these challenges. The exchange’s legal struggles are further compounded by recent reports that WazirX Keeps ₹100 Crore from User Funds for “Legal Costs”; Faces Four Legal Notices, highlighting the mounting pressure on the platform. Additionally, WazirX CEO Addresses Ownership Dispute and Withdrawal Issues Amid Ongoing Challenges, indicating that the exchange is grappling with multiple issues beyond the immediate fallout of the hack. As WazirX files for a moratorium in the Singapore Court amid the cyberattack fallout, it remains to be seen how the exchange will manage to protect its customers and restore confidence in its platform.
In conclusion, while WazirX is exploring all possible avenues to minimize customer losses, the chances of full recovery in crypto terms are slim. The coming weeks will be critical as the exchange works to restructure its liabilities and address the significant gaps in customer funds.
