WazirX comes up with controversial plan to deal with hack aftermath
WazirX is trying to resume services on its platform as it investigates the recent hack of one of its wallets overseen by Liminal Custody, which led to a loss of $230 million (approximately Rs. 1,900 crore). Over the weekend, the exchange had published details of a ‘socialized loss strategy’ it has devised to tackle the financial fallout of the hack. As part of the plan, the exchange has decided to ‘equitably’ distribute the impact of the loss to all its users, irrespective of whether their funds were directly affected by the hack. The development has stirred controversy in the Indian crypto sector.
When explaining his strategy, blog post by WazirX said: “Users with 100 percent of their tokens in the ‘not stolen’ category will get 55 percent of those tokens back. The remaining 45 percent will be converted into USDT equivalent tokens and locked.”
According to the Mumbai-headquartered exchange, this 55/45 approach should strike a balance between direct access to a portion of users’ assets and the exchange’s hope for a future recovery of lost funds.
WazirX has essentially presented its 16 million user base with two options, noted Arjun Vijay, co-founder of the Giottus crypto exchange. Over the weekend, Vijay called WazirX’s plan “terrible,” claiming that the exchange is “blackmailing” its users into voluntarily freezing their funds or not prioritizing them if there were to be a recovery.
“Customers are given two options. Either voluntarily disable their crypto/INR withdrawals and continue trading and INR deposits or choose the other option where withdrawals are open but with a daily limit,” Vijay said. “In case the hacked amount is recovered, people who choose option A will be rewarded with hundred percent of their money back, but people who choose option B will have to settle for just a few percent of the compensation.”
WazirX seems to be facing a backlash from the Indian crypto circle over this strategy. CoinDCX’s Sumit Gupta also joined the discussion with Vijay opposing WazirX’s plan and asking the exchange to reconsider its actions.
One of our customers received the mail and I am shocked at the terrible choices that have been offered. Wazirx asks users to voluntarily freeze their money and blackmails them if they don’t, they will not be given priority in recovery.
Wazirx is responsible for… photo.twitter.com/EGw4M3MFxK
— Arjun Vijay (@arjunvijay89) July 27, 2024
I hate to say this, but the way @WazirXIndia this whole situation is not community first and IMO this will not end well for them. This unfortunately also hurts the other participants in the ecosystem.
The first contribution to losses must ALWAYS come from the Company…
— Sumit Gupta (CoinDCX) (@smtgpt) July 29, 2024
The exchange has not responded to feedback from industry stakeholders yet. According to the blog, this strategy is fair and transparent and distributes the impact fairly. The exchange also cited instances where other crypto exchanges such as Bitfinex used this strategy to manage a similar situation.
Meanwhile, the seriousness of this case has increased. Reportedly caught the attention of the FBI. Over the weekend, the FBI reportedly contacted WazirX to ask for details about this hack. According to a statement released by cybersecurity firm Cyfirma on Monday, July 29, it has been confirmed that the notorious Lazarus Group from North Korea is responsible for this hacking attack. WazirX has yet to confirm Cyfirma’s findings.
