WazirX Initiates Phased Recovery Plan Following $230 Million Hack

TLDR:

• WazirX experienced a major security breach on July 18, resulting in losses over $230 million
• The exchange announced a restructuring plan and will allow phased INR withdrawals starting August 26
• External parties are allegedly attempting to prolong WazirX’s restructuring efforts
• WazirX is pursuing legal proceedings in Singapore as part of its restructuring process
• Co-founder Nischal Shetty denies claims that remaining assets are gone and warns about fake accounts spreading misinformation

Indian cryptocurrency exchange WazirX is taking steps to recover from a major security breach that occurred on July 18, 2024. The hack resulted in losses totaling over $230 million and led to the suspension of withdrawals and trading on the platform.

In response, WazirX has announced a comprehensive restructuring plan aimed at stabilizing its operations and protecting user interests.

The exchange plans to restart Indian Rupee (INR) withdrawals in phases beginning August 26. According to WazirX, Zanmai Labs Pvt Ltd, the operating entity for INR-related activities on the platform, was not affected by the hack and has sufficient reserves to cover all INR balances.

However, due to ongoing disputes and legal investigations, 34% of the INR balances are currently frozen.

In the first phase, ending on September 8, users will be able to withdraw half of the 66% limit.

From September 9 to September 22, the exchange will allow users to withdraw the remaining half of the 66% limit. WazirX has also announced a 60% reduction in withdrawal fees to alleviate the financial burden on its users.

The exchange stated that it does not have enough cryptocurrency to enable withdrawals at this time. WazirX is still exploring avenues to recover the stolen assets, including through bounty programs and other legal channels. The company acknowledges that these recovery efforts will take time and patience to deliver results.

As part of its restructuring efforts, WazirX is pursuing legal proceedings in Singapore, where the company has selected the jurisdiction for its legal restructuring process.

This includes implementing a court-approved scheme of arrangements, which allows WazirX to negotiate fair and equitable terms for all parties affected by the hack.

WazirX has expressed concerns that certain external parties may be attempting to prolong its restructuring process for their own gains.

In a post on social media platform X, the exchange stated that these parties intend to create and maintain “uncertainty” rather than find a resolution. WazirX emphasized that restructuring is the best course of action and the “most expedient and legally sound approach” to address its current situation.

👋 tribe! We understand that our decision to pursue this restructuring path may raise some concerns, but we want to emphasize that it is the most expedient and legally sound approach to addressing the current crypto-related issue.

We believe this direction is in the best… pic.twitter.com/1NiLMV88E9

— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) August 24, 2024

Co-founder Nischal Shetty has addressed user concerns about the remaining assets following the cyberattack.

He stated that misinformation has caused unnecessary fear by suggesting these assets are also gone, emphasizing that such claims are baseless and made only to attract attention.

Shetty promised to share WazirX’s Proof of Reserves (PoR) after a new custody provider has been secured.

Shetty also warned users about a new trend of fake accounts impersonating WazirX to spread misinformation. He urged users to be cautious and focus on constructive solutions rather than perpetuating negativity.

The exchange plans to release more details of its restructuring efforts in the coming week. WazirX has reminded users that this is not a bankruptcy or liquidation proceeding, both of which would take years to resolve.

In response to the WazirX breach, India’s Bharat Web3 Association has emphasized its commitment to enhancing cybersecurity measures and safeguarding consumers in the crypto industry.

This incident follows a series of regulatory challenges for cryptocurrency exchanges in India, including notices issued by the Financial Intelligence Unit of India’s Ministry of Finance in December 2023, claiming some exchanges operated illegally and failed to comply with Anti-Money Laundering requirements.