WazirX Customers May Not Recover Full Funds, Exchange Faces Recovery Challenges

SUMMARY

Customers of WazirX, the Indian crypto exchange that experienced a $234 million hack in July, may not recover their full funds due to ongoing restructuring challenges.
George Gwee, a director at restructuring firm Kroll, stated that at least 43% of the funds held by customers are unlikely to be recovered.
WazirX has requested six months of protection from a Singapore High Court to manage its restructuring process.

WazirX, the Indian cryptocurrency exchange that suffered a stunning $234 million hack in July, faces critical challenges in returning funds to its clients. George Gwee, a director at the restructuring firm Kroll, revealed that the best-case scenario for fund recuperation is between 55% and 57%. As part of its restructuring, WazirX plans to disperse remaining token assets to clients on a pro-rata basis and is investigating ways to share profits from its revenue-generating products, although particular details remain undisclosed.

The hack, which remains the biggest cryptocurrency theft in India’s history, has caused significant turmoil within the country’s crypto industry. Since the occurrence, WazirX has been actively looking for solutions to return funds to affected clients. In July, the company proposed socializing the loss, but subtle elements on how it will accomplish this have been meager. Amid a recent press conference, WazirX representatives dodged numerous questions about their endeavors to stabilize the company’s capital. The firm is in talks with an anonymous potential investor, referred to as a “white knight,” but is not seeking equity-based capital due to a dispute with Binance, the world’s biggest cryptocurrency exchange.

Binance had declared the acquisition of WazirX in late 2019 but afterward contested the acquisition. Following a public dispute, Binance cut its tech ties with WazirX in 2022. When inquired about Binance’s proprietorship or a potential sale of WazirX, the company declined to comment. Moreover, WazirX was hesitant about the possibility of legal action against Binance or Liminal, the multi-signature wallet provider allegedly compromised in the hack.

The weight on WazirX is intensifying, with CoinSwitch, another major Indian crypto exchange, recording legal action to recoup roughly $9.7 million worth of assets stuck on WazirX’s platform. WazirX moreover counts Indian law enforcement agencies among its clients, adding another layer of scrutiny to the unfolding crisis.

The circumstance underscores the broader challenges confronting cryptocurrency exchanges in the wake of critical security breaches. As WazirX proceeds its restructuring endeavors, the industry observes closely to see how the company navigates its way out of this tumultuous period. The result will not only influence its clients but may also affect the general belief and stability within India’s quickly evolving crypto landscape.