WazirX Can’t Use Your XRP for Their Losses, Indian Court Decides

• Landmark Indian court ruling classifies cryptocurrency as legally protected “property.”
• Court blocks WazirX from using unaffected user XRP to cover its $234M hack losses in Ether and ERC-20 tokens
• Singapore parent company’s loss-sharing plan deemed unenforceable under Indian contract law

The Indian court delivered a major win for investor rights, ruling that cryptocurrency constitutes ‘property’ under domestic law, thereby blocking the embattled exchange WazirX from imposing a collective loss-sharing plan on its users. Specifically, the court prohibited WazirX from redistributing user-owned XRP holdings to cover unrelated losses (Ethereum and ERC-20 tokens) stemming from the exchange’s massive July 2024 cyberattack.

The court determined that user-owned crypto assets held in custody by exchanges cannot be redistributed to cover collective losses.

Related: WazirX Relaunches Oct 24 After $230M+ Hack, Offers Fee Waiver Under New Structure

Indian Court Affirms Crypto is Property, Shields User XRP from WazirX Plan

The case originated when a WazirX investor, holding 3,532 XRP purchased before the hack, sought legal protection to prevent the exchange from including her assets in a recovery plan. WazirX had suffered a devastating $234 million hack primarily involving Ethereum and ERC-20 tokens, freezing user accounts. The investor argued her XRP was entirely separate from the stolen assets and thus should be fully accessible and excluded from any loss socialization scheme.

She filed under India’s Arbitration and Conciliation Act, seeking an injunction against WazirX’s operating entity, Zanmai Labs Pvt Ltd. The exchange countered, arguing it was bound by a restructuring plan approved by the High Court of Singapore for its parent company, Zettai Pte Ltd., which mandated proportional loss sharing across all users.

Why WazirX’s Singapore Loss-Sharing Plan Failed Under Indian Law

Justice Venkatesh decisively rejected WazirX’s argument, prioritizing Indian legal principles. The court found no clause within WazirX’s user agreement explicitly permitting the redistribution of one user’s unrelated assets to cover another’s or the exchange’s losses.

Crucially, the judge ruled that foreign court orders, like the one from Singapore approving Zettai’s plan, cannot supersede Indian consumer protection laws and property rights without a clear contractual basis agreed upon by the Indian user. 

“The basis of such a proposition is not any term in the contractual framework between the parties,” the ruling reportedly stated, rendering the loss-sharing aspect unenforceable within India for users who hadn’t explicitly consented.

Custodian, Not Owner: Ruling Reinforces Exchange Duty to Protect Assets

The court further dismantled WazirX’s position by clarifying the legal relationship between an exchange and its users regarding deposited assets. Likening the proposed loss-sharing to an unauthorized “group insurance of a self-help group,” the judgment found no legal basis for treating distinct, user-owned assets held in custody as a collective pool to absorb exchange failures or losses in unrelated assets.

This powerfully affirms that under Indian law, exchanges like WazirX act as custodians. They hold assets on behalf of users, who retain ownership. The exchange cannot unilaterally claim or redistribute these assets, especially those unaffected by a specific security breach, without explicit user consent outlined clearly in the terms of service.