As a seasoned researcher with years of experience under my belt, I find myself constantly intrigued by the dynamic world of cryptocurrencies and digital exchanges. The recent turn of events at WazirX exchange has caught my attention, not due to its usual success stories, but because of the unusual circumstances it finds itself in.
As an analyst, I must acknowledge that WazirX has been under scrutiny due to its choice of using user funds to cover “legal expenses” following the July 18 cyberattack. However, in a recent statement on Saturday, the exchange’s leadership reiterated their stance that it is essential for users to contribute towards the legal battles they are currently engaged in.
According to The Crypto Times, following a cyber theft worth approximately 20 billion rupees, WazirX’s co-founders and their company Zettai Pte Ltd are currently dealing with multiple lawsuits, either from other parties like Binance or their own customers. Notably, WazirX previously disclosed that they have allocated around $12 Million (roughly 100 crores in Indian rupees) for legal and operational expenses.
Users have expressed anger over WazirX’s decision to use funds for legal battles, as they questioned why their money was being used in this way. According to an affidavit filed by Zettai in the Singapore High Court, WazirX management is currently dealing with four separate legal notices and ongoing disputes with Binance.
On Saturday, WazirX disclosed on their platform that they intend to utilize user deposits to oversee their ongoing court disputes, following the submission of a moratorium request at the Singapore High Court.
Below are responses to frequently asked questions about our Moratorium Application:
— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) September 7, 2024
The statement from WazirX exchange explains that legal expenses connected with restructuring and court proceedings are crucial to make certain any restructuring is enforceable by law and carried out systematically. Additionally, there are ongoing legal costs that Zettai is still pursuing, all of which need to be covered using Zettai’s assets.
WazirX mentioned that their parent company, Zettai, is currently negotiating with possible investors (often referred to as “white knights”) for emergency funding. This money could potentially help cover the expenses they’ve been discussing.
WazirX, under its parent company Zettai, has asked the High Court of Singapore for a temporary pause (moratorium) in proceedings. This request is made to provide them with time to develop a strategy to recover the crypto balances that were compromised due to a cyberattack on July 18, 2024, which resulted in the loss of approximately $230 million worth of assets.
If approved, the moratorium would provide multiple benefits to the WazirX exchange: it would temporarily halt any proceedings aimed at dissolving the company, and all ongoing legal actions against Zettai would be paused without the court’s explicit consent first.
WazirX states that these actions aim to safeguard the company during discussions with prospective investors regarding user fund recovery. Unfortunately, the imposed moratorium may not provide significant relief for affected WazirX users, as legal experts predict that all users could potentially face a 43% reduction in their total account balances.
Despite WazirX asserting that employing user funds for legal disputes benefits its clients, this move has sparked criticism from the community. Additionally, WazirX has made known that cryptocurrency trading will stay on hold until a restructuring plan is accepted by creditors and endorsed by the High Court of Singapore.
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2024-09-07 15:01