Indian crypto exchange CoinSwitch has decided to take legal action against its troubled contemporary WazirX in a bid to recover its funds that were stuck on the latter’s platform following a hack last month. In a detailed post published on X, CoinSwitch revealed that two percent of its total funds — worth Rs. 810 crore (approximately $9.65 million) — were stored with WazirX. Following the breach of one of WazirX’s multi-sig wallets in July, the crypto exchange froze all withdrawals, leading to CoinSwitch’s funds being stuck. CoinSwitch said that it had used its own treasury to ensure a 1:1 ratio to back users’ crypto holdings on its platform.
CoinSwitch said that as an exchange aggregator, it maintained seven percent liquidity on third-party exchanges. The exchange revealed that it had Rs. 12.4 crore in INR, Rs. 28.7 crore in ERC20 tokens and Rs. 39.9 crore in other tokens maintained on WazirX. CoinSwitch fears that given WazirX’s controversial approach to financial restructuring, a full recovery of these funds may not be possible.
“As per WazirX’s claim, only ERC20 tokens were affected by the alleged cyberattack, which amounts to less than one percent of total CoinSwitch funds,” the exchange said on X. “We have attempted to maintain regular contact with WazirX since the day of the incident, but have not been able to find a solution to recover the funds trapped on their platform. As such, we are now taking steps, including legal action.”
CoinSwitch has not yet provided detailed information about the legal action it is taking against WazirX.
CoinSwitch also assured its users that their funds on the platform were safe. The exchange said it would also publish a transparency report in the coming days.
“Overall, we hold funds that are 1.51 times the size of user assets invested through CoinSwitch. Our total assets, which are significantly larger than user holdings, give us the ability to absorb external shocks,” the exchange claimed.
Why are we forced to take legal action against WazirX?
Since the day of the incident, we have been trying to maintain constant contact with the WazirX team, in an attempt to recover the funds that were stuck on their exchange. However, our efforts have not yielded any results, leaving us unable to…
— CoinSwitch: India’s simplest crypto app :rocket: (@CoinSwitch) August 28, 2024
WazirX has not yet publicly commented on the development. Gadgets360 has reached out to the crypto exchange for comment.
This week, WazirX’s majority-owned entity in Singapore, Zettai Pte Ltd., filed for a moratorium — a breather — to restructure its finances. Zettai’s application, filed in a Singapore court, and WazirX estimate it could take at least six months to formulate a plan, which, if approved by creditors and ratified by the Singapore court, “would be legally binding on all relevant parties.”
On July 18, one of WazirX’s multi-sig wallets, which was overseen by Liminal Custody, was hacked, leading to the theft of over $230 million (approximately Rs. 1,931 crore). Both Liminal and WazirX have claimed that their respective systems were not breached in the attack, citing internal investigations, leaving affected users confused and unsettled.
WazirX had suspended all trading, withdrawal, and deposit services following the hack. This week, the exchange allowed its users to process INR withdrawals of up to 66 percent of their funds. The remaining 34 percent of each user’s funds remain frozen for now as the investigation into the incident continues. Crypto withdrawals on WazirX remain suspended for now.
North Korea’s notorious Lazarus Group is the prime suspect in this hack. However, confirmation from WazirX is still pending.
