As an experienced financial analyst who has navigated through numerous corporate financial statements, I must say that the situation with Zettai Pte. Ltd., particularly WazirX, raises a few eyebrows. The significant spending on sales and marketing in 2022 coupled with a steep drop in revenue for 2023, along with the mysterious rise in other receivables, leaves me questioning the financial health of the company.
Over the next few days, it will mark two months since the massive crypto heist in India, which resulted in a staggering loss of approximately Rs 2000 crore from the WazirX exchange. The future of around 4.4 million users on WazirX in India remains precarious, with their fates hanging by a thin rope, held by co-founder Nischal Shetty and the exchange management. Regrettably, they have been accused of deception since the very beginning of the hack.
On the 10th of September, Nischal provided a supplementary declaration to the Singapore High Court, which was connected to the moratorium request made by Zettai Pte Ltd – the Singapore-based parent company of WazirX. Prior to this, on the 27th of August, he had already submitted a different declaration. Both declarations include details about the financial statements of Zettai and the distribution of Indian Rupees (INR) and cryptocurrency holdings for the WazirX exchange platform.
In this unique piece, we provide an in-depth comparison between the two statements to reveal a complex network of technical flaws, dishonesty, and inconsistencies in the operations of Zettai Pte Ltd versus WazirX.
WazirX Affidavit: Clarifications and Unanswered Questions
On September 10, Nischal Shetty filed a supplementary affidavit to the High Court of Singapore under the Insolvency, Restructuring and Dissolution Act.
As per Shetty, the two affidavits were meant to provide various updates regarding Zettai’s engagement with creditors, clarifications on anomalies, and some updates on the restructuring process. However, the second affidavit details has only highlighted the obscure dealings of Zettai.
Initially, in the first sworn statement, it was revealed that during the cyber attack, they possessed a grand total of $570,068,358. Out of this sum, an estimated $234 million was taken. But in the subsequent declaration, they amended this figure, stating their overall assets amounted to $546,472,935 and also disclosed that they were referring to funds in Indian Rupees as well.
However, the INR funds are managed by Zanmai which is an Indian entity and the crypto funds were handled by Zettai, a Singapore entity so why are the funds not separated? If the Zanmai and Zettai are different entities, how are INR funds included in the affidavit?
Moreover, WazirX claimed in their July 25, 2024 blog post that 45% of funds were stolen. However, if we subtract the total funds from the stolen funds and calculate the percentage, it comes to 42%.
On June 12, 2024, WazirX released its Proof of Reserves Report, stating that the exchange keeps a reserve-to-liabilities ratio over 1:1. However, this detail wasn’t included in the affidavit, and the team did not bring it up following the hack.
If there was an excess of funds in the company’s records, one might wonder why the team didn’t discuss it. In other words, it raises questions about whether the company’s report was truthful, or if they chose not to disclose the surplus to preserve their own resources.
Lack of Transparency In ZETTAI Financial Statement
As a researcher, I recently came across a supplementary affidavit from Zettai Pte. Ltd., which marked the first time they disclosed their financial statements. Upon closer examination, these documents presented several potential issues and inconsistencies that cast doubt on the veracity and openness of the reported data.
In 2022, WazirX’s financial report showed that the company brought in around $108 million in earnings. The majority of this income, roughly $80 million, was invested in sales and marketing efforts, while about $18 million was allocated for administrative costs and other expenses.
In 2023, Zettai earned a total of $12,138,206 but experienced an alarming 88% decline in year-over-year revenue compared to the previous year, resulting in a net loss of approximately $1,349,800 for that year.
Furthermore, it’s troubling that other outstanding debts increased from $27,773,263 in 2022 to $8,832,063 in 2023, a jump of 68.2%. This substantial increase in receivables wasn’t adequately explained in the financial report and has prompted questions about whether these amounts can be recovered.
The financial statement also shows a 91.5% drop in the trade payables and also raises concerns about Zettai’s cash flow management. Moreover, the outflow in the cash flow is also not explained in the statement.
In simpler terms, it seems that the information presented in Zettai’s financial reports doesn’t give a complete picture of their financial status and operations. Important details like the specifics behind outstanding debts (other receivables) and the explanations for the large reduction in accounts payable (trade payables) are missing.
11 White Knights or Just a Delay Tactic?
In their second declaration, WazirX mentioned they’re negotiating with 11 significant crypto platforms for capital investments – a procedure where one company receives funds from another as an investment. Moreover, they disclosed that WazirX has entered into confidentiality agreements (Non-Disclosure Agreements) with three of these exchanges.
The statement further mentioned that they were engaged in discussions about numerous collaborations, potential airdrops, recovering lost assets, distribution of tokens during the Token Generation Event, and other related matters.
A significant challenge facing WazirX’s ambitious goals is their ongoing legal issues with Binance. At present, both Zettai and Binance are embroiled in a legal battle regarding the administration of the WazirX platform and the safekeeping of cryptocurrency assets. Neither party seems inclined to assume responsibility for users’ cryptocurrency holdings.
If the issue between Binance isn’t resolved soon, it seems very unlikely that potential rescuers or benefactors (the “white knights”) would be inclined to intervene.
Conclusion
The second sworn statement underscores the oversight in Zettai’s operations relative to WazirX, where simple errors occur, including those found in court papers. Furthermore, several questions remain unanswered up to this point, despite users growing increasingly impatient and requesting complete withdrawal of their funds.
As events progress, doubts linger: will this saga end in restoration or more deceit? The situation is critical, with the resolution yet to be seen, keeping investors and shareholders tense as they wait for the upcoming installment of India’s largest cryptocurrency dilemma.
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2024-09-12 12:05