As a long-time cryptocurrency investor with my fair share of digital assets stored on WazirX, I find myself deeply concerned and frustrated by the ongoing saga surrounding this exchange. The accusations leveled against Nischal Shetty and his team are not only alarming but also raise serious questions about the integrity of their operations.
After a challenging, lengthy 50-day delay since the WazirX hack involving Rs 2000 crores, a legal team representing approximately 1.5 million Indian cryptocurrency exchange users has penned a letter to the Chief Justice of India (CJI), appealing for his involvement in resolving this matter.
In simpler terms, the lawyers’ letter sent to Justice D.Y Chandrachud in India, alleges that Nischal Shetty, along with his team at WazirX, manipulated the situation to steal approximately 50 billion rupees worth of virtual assets through deceptive practices. The letter requests a thorough criminal investigation using sections from the Bharatiya Nyaya Sanhita Act 2023, the PMLA Act 2002, and the IT Act 2008.
As an analyst, I’m sharing some recent developments regarding WazirX, a cryptocurrency exchange I’ve been monitoring. On July 18, the platform suffered a significant cyberattack that led to a staggering loss of approximately 45% of user funds, equivalent to around $234 million or Rs 2000 crores in Indian currency.
In light of no apparent solution, the affected users of WazirX have sought help from the Indian judiciary, requesting them to take independent notice of the case and order investigative bodies to scrutinize the hack incident and allegations of misconduct leveled against the management, including co-founder Nischal Shetty.
Accusations Against Nischal Shetty
The letter accuses Nischal Shetty, the founder of WazirX, along with his associates, of masterminding a meticulously planned digital heist.
The letter claims that the exchange’s staff intentionally let 45% of users’ digital assets, valued at approximately Rs 5000 crores, be stolen using one of their multi-signature non-custodial cold wallets. The letter also raises doubts about why only this particular cold wallet was targeted and not the others, suggesting a potential inside job.
Claims of Mismanagement and Delay in Action
The letter expresses significant apprehensions about WazirX’s slow action in filing an FIR following the reported cyber attack on July 18, 2024. It wasn’t until August 5, 2024 that they finally registered a formal complaint under the Bharatiya Nyaya Sanhita and IT Act. This lengthy delay, combined with the swift assumption that North Korean hackers were responsible, has sparked considerable doubt about WazirX’s management’s transparency among many people.
Questioning the Socialized Loss Strategy
The letter further discusses the contentious move made by Nischal Shetty and his team at WazirX, which involved sharing the 45% loss among users. This idea was first suggested on July 27, 2024, with the intention of distributing the loss evenly among all users. However, after facing a wave of public criticism and a lawsuit from another exchange, CoinSwitch, WazirX decided to abandon this plan. Nevertheless, users continue to voice their concerns over this decision and are now calling for WazirX to present evidence of their reserves (Proof of Reserves – PoR) to resolve the issue.
Singapore Legal Strategy and Use of User Funds
Furthermore fueling the debate, the letter alleges that Shetty employed user funds to retain Singaporean attorneys, estimated to have cost around 100 billion rupees, in an effort to establish a moratorium based on Singapore’s Insolvency, Restructuring, and Dissolution Act of 2018. The letter posits that foreign court rulings should not affect Indian citizens and raises doubts about the validity of classifying users as potential debtors under Singaporean legal standards.
Calls for National Investigation
Given these accusations, the letter is requesting an examination by India’s national institutions such as the CBI and ED, regarding the claims of mismanagement, breach of trust, and potential inside job in WazirX. The legal team raises doubts about how the hacker obtained confidential wallet data and proposes that the entire incident might have been masterminded from within WazirX itself. They also urge a thorough inspection into the exchange’s management of user assets and the transparency of its business practices.
Legal and Constitutional Concerns
The letter asserts that while the right to property is no longer a fundamental right, it remains a valuable constitutional right. The complainants argue that penalizing Indian citizens for losses incurred through no fault of their own is unjust and unconstitutional. They urge the judiciary to hold Nischal Shetty and his team accountable under Indian laws, including the Bharatiya Nyaya Sanhita Act 2023.
This correspondence signifies a significant step-up in the ongoing legal dispute between WazirX and Nischal Shetty. Given that 1.5 crore users are calling for resolution, this case could establish a notable precedent for overseeing and enforcing accountability upon digital asset trading platforms within India. The potential consequences of this situation may reverberate across the entire cryptocurrency sector.
Read More
Sorry. No data so far.
2024-09-07 21:08