Introduction Of WazirX
It, a leading Indian cryptocurrency exchange, is grappling with the aftermath of a devastating hack that resulted in the theft of $234 million in July. The exchange’s customers, who were hoping for a full recovery of their funds, are now facing grim prospects. According to George Gwee, a director at the restructuring firm Kroll, which is overseeing WazirX’s restructuring, at least 43% of the funds held by customers are unlikely to be recovered.
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The Restructuring Process and Customer Payouts
WazirX recently sought protection from the Singapore High Court to give itself six months to restructure its liabilities. During this period, the exchange aims to prioritize the distribution of remaining token assets to users on a pro-rata basis. However, Gwee indicated that the best-case scenario for customers would be a return of between 55% and 57% of their original funds.
WazirX is also exploring ways to share profits from its revenue-generating products with customers, although specific details remain undisclosed. The company’s approach to addressing the massive loss has drawn significant attention, particularly after it proposed socializing the “force majeure” loss, essentially spreading the financial burden across its user base.
The Aftermath of the Largest Cryptocurrency Theft in India
The July hack is the largest cryptocurrency theft in Indian history, and its impact has reverberated across the country’s burgeoning crypto industry. Since the breach, It has been scrambling to find solutions to return funds to its customers, but the road to recovery appears challenging.
During a recent press conference, It representatives sidestepped many questions regarding the company’s efforts to secure additional capital. Although the exchange has hinted at ongoing discussions with a potential “white knight” investor, it has made it clear that any capital raised will not be exchanged for equity due to an ongoing dispute with Binance, the world’s largest cryptocurrency exchange.
Binance and WazirX: A Complicated Relationship
The relationship between WazirX and Binance has been fraught with controversy. In late 2019, Binance announced its acquisition of WazirX in a blog post, but the acquisition was later disputed, leading to a public fallout between the two companies. In 2022, Binance terminated its technical support to WazirX, further straining their relationship.
When asked about Binance’s ownership status during the press conference, WazirX representatives declined to comment. They also ruled out the possibility of selling It as part of the restructuring process. Additionally, when pressed about potential legal actions against Binance and Liminal, the multisignature wallet provider whose system was allegedly compromised during the hack, the company had no clear answers.
Mounting Legal Pressure
WazirX is under increasing pressure, particularly after CoinSwitch, another major Indian crypto exchange, initiated legal action against It last week. CoinSwitch is seeking to recover approximately $9.7 million worth of assets that remain stuck on It platform. This legal battle only adds to It woes as it navigates the complex restructuring process.
Conclusion
The future remains uncertain for It and its customers. As the exchange works through its restructuring, the likelihood of full fund recovery for its users is slim. With mounting legal challenges and an unresolved dispute with Binance, It path forward is fraught with difficulties. Customers and industry observers alike will be watching closely as the exchange attempts to regain its footing in the wake of this unprecedented hack.
