As a seasoned crypto investor with a knack for navigating through the complexities of this dynamic market, I find myself intrigued by the ongoing legal battle between CoinSwitch and WazirX. The recent affidavit filed by Bitcipher and NGD has shed some light on their strategic positioning as ‘secured creditors’, a move that could potentially shield them from the broader disputes related to the WazirX hack.
In the recent dispute between CoinSwitch and WazirX, the respective parent companies, Bitcipher and NGD, submitted a significant document – an affidavit – that defined their financial status as ‘secured creditors’. This affidavit also emphasized that the funds they hold are under Zanmai India, rather than Zettai Pvt. Ltd.
In this legal dispute, Bitcipher and NGD highlighted a Broker Agreement they had with Zanmai India. This agreement allows CoinSwitch to stand out among ordinary creditors as it is considered a secured creditor regarding its claim of approximately 73 crores INR.
Previously, the affidavit brought attention to the erroneous categorization of Bitcipher and NGD as unsecured, contingent creditors. I, as a researcher, would like to emphasize that both Bitcipher and NGD are asserting their contractual ties are exclusively with Zanmai India, not Zettai SG. They believe their creditor status should be reclassified as secured creditors due to these specific relationships.
As per Clause 5(b) of the contract, it is stated that Zanmai India was designated to safeguard cryptocurrency assets within their brokerage accounts, ensuring a reasonably secure storage for both Bitcipher and NGD on the Platform.
The key takeaway from this clause is that the crypto assets and Indian Rupees held by Zanmai India for Bitcipher and NGD are held in a fiduciary capacity, specifically segregated from the general pool of funds.
Clause 6 of the Broker Agreement reinforces this stance, indicating that “the Indian Rupee funds and cryptocurrencies stored or held by [Zanmai India]… will not be recognized as assets belonging to [Zanmai India].
In simple terms, Clause 6 ensures that no ownership of the Indian Rupee balance or cryptocurrency assets has been passed to Zanmai India. Instead, these assets are exclusively intended for the advantage of Bitcipher and NGD.
Additionally, the contract clearly specifies that Zanmai India will not recognize, assign, or accept any third-party ownership, claims, or rights over the Indian Rupee balance and crypto assets. This clause unequivocally establishes Bitcipher and NGD as secured creditors with a direct claim to the INR 73 crore held by Zanmai India on their behalf, ensuring the safety and ownership of these funds.
19th September 2024 saw Zettai SG challenging this stance by explaining that Bitcipher and NGD held a contingent, unsecured debt with Zettai SG.
According to CoinSwitch, they maintain that their operations fall under Zanmai India, a platform registered with the Financial Intelligence Unit (FIU) in India as early as 2023 and acknowledged by the Enforcement Directorate. There have been concerns on Twitter regarding potential violations of Indian laws and FIU regulations by WazirX, which could carry significant allegations against them.
According to the declaration from CoinswitchKuber Exchange, it appears that WazirX has violated Indian laws and regulations that fall under the Financial Intelligence Unit (FIU). It’s unclear as to why WazirX is acting in this manner.
— Pushpendra Singh (@pushpendrakum) September 26, 2024
As an analyst, I can say that by directly and securely connecting with Zanmai India, CoinSwitch has strategically distanced itself from the wider implications of the WazirX hack, ensuring its own operations remain unaffected.
It’s surprising that WazirX, often referred to as the top Indian cryptocurrency exchange, is dealing with a legal issue through the Singapore High Court. Today, the court has granted a moratorium to WazirX.
In my analysis, Bitcipher and NGD have put forth a case to the court to dismiss the application for the moratorium on the grounds that it is procedurally flawed and incorrectly classifies creditors. Additionally, they are advocating for a declaration stating that the moratorium does not impact their claims of ₹73 crores against Zanmai India.
Bitcipher and NGD assert that Zettai SG has not fulfilled at least two essential requirements as outlined in Section 64 of the Insolvency, Restructuring, and Dissolution Act 2018 (IRDA). Specifically, they claim Zettai SG did not supply a comprehensive list of their top 20 unsecured creditors, an essential procedural obligation that is crucial for transparency.
I deeply value the efforts of @CoinSwitch, however, it seems they prioritize their $10 billion (approx.) over actively supporting the victims of #WazirX. It appears as though they’re arguing in court, “Feel free to handle the users as you see fit, just keep us out of this situation…
— Justice for WazirX Users (@IndiasCrypto) September 24, 2024
Nevertheless, the affidavit has left WazirX victims feeling let down as they believe that CoinSwitch prioritizes the recovery of their ₹73 crores over supporting the victims in a meaningful way.
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2024-09-26 15:48