As a researcher with years of experience in the complex world of digital assets and legal battles, I find myself deeply concerned about the ongoing saga between the victims and WazirX. The $235 million hack on WazirX has left countless users feeling frustrated and vulnerable, and it’s disheartening to see such a significant player in India’s crypto landscape facing these challenges.
A group of victims is preparing a lawsuit against crypto exchange WazirX following the $235 million hack.
30 individuals affected by the hack on WazirX that occurred on July 18 and resulted in approximately 45% of user funds being withdrawn from the exchange’s hot wallet, are planning to file a collective lawsuit against the platform with the National Consumer Disputes Redressal Commission in India, as reported by local media.
As a researcher studying this case, I find myself empathizing with the victims who are striving to reclaim cryptocurrency assets valued at approximately INR 5 crores (equivalent to around $600,000). They claim that the actions taken by the exchange have transgressed its legal boundaries.
Approximately 4 million users were affected by the $235 million hack, leading the exchange to pursue a Scheme of Arrangement in Singapore, which is a type of restructuring process governed by local bankruptcy laws. WazirX successfully obtained a four-month reprieve, preventing any legal actions from being pursued against it during this timeframe.
By mid-November, it’s expected that a legal action will be initiated, which is based on the argument that WazirX’s user agreements were handled by its Indian company, Zanmai Labs Pvt. Ltd.
Victims weren’t informed of frozen cash balances
Supreme Court lawyer Aman Rehaan Khan is representing the victims.
Khan contends that the move by the exchange to seek asset reorganization in Singapore via its parent company, Zettai Pte Ltd, lacked a solid legal basis.
“Zettai was never a party to the user agreement,” said Khan.
In Singapore, Zettai manages the cryptocurrency holdings of the exchange, while Zanmai Labs handles cash deposits specifically for users in India. Initially, Zanmai was responsible for WazirX’s operations within India, but it has since been completely acquired by Zettai. As stated on WazirX’s website, this transition occurred due to a dispute over ownership between Zettai and Binance, resulting in Zettai now controlling the platform’s assets.
About a month following the incident, WazirX disclosed that users could withdraw approximately 55% of their cryptocurrency assets and 66% of their cash deposits. This was the first time the platform made public that one-third of users’ cash balances were being held due to independent legal disagreements and ongoing law enforcement investigations.
Khan stated that users weren’t made aware that their cash balances had been temporarily held by an external organization, an action he considers another breach of trust deserving of both compensation and penalties.
Khan expects more victims to join by the time the lawsuit is filed.
WazirX under fire
WazirX, a prominent Indian cryptocurrency trading platform, has been under close examination and encountered numerous legal hurdles over the past few years.
Additionally, the report mentioned that aside from the ongoing legal action, there are two other cases against the exchange in the Delhi High Court. On August 28th, Ashish Singhal, one of the co-founders of CoinSwitch, alleged security flaws on the exchange. Meanwhile, an investor named Jaivir Bains submitted a petition on October 18th, demanding an investigation into a reported hack.
In September, WazirX applied for a moratorium, which is a form of protection during a reorganization process, since their parent company resides in Singapore. The application was granted, providing them with a four-month period of legal protection, meaning they are currently shielded from any ongoing lawsuits.
Further, a separate group of 11 users plan to pursue legal action once the moratorium has expired.
It appears that the Financial Intelligence Unit of India, which specializes in examining and sharing financial data pertaining to money laundering and funding for terrorist acts, is rumored to be investigating the cryptocurrency exchange platform known as WazirX.
As an analyst, I’ve provided the relevant server logs, transaction histories, and blockchain addresses associated with the misappropriated funds to the appropriate authorities for further investigation.
On October 25th, the platform disclosed their search for a new insurance-offering custody partner, aimed at bolstering the security of user assets.
WazirX was founded by former CEO Nischal Shetty and CTO Sameer Mhatre.
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2024-10-26 15:16