Indian crypto exchange CoinSwitch has decided to take legal action against its troubled contemporary WazirX in an attempt to recover its funds stuck on the latter's platform following a hack last month. In a detailed post published on X, CoinSwitch disclosed that two percent of its total funds — worth Rs. 810 crore (roughly $9.65 million) — were saved 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 it had used its own treasury to ensure 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 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 complete recovery of these funds may not be possible.
“According to the WazirX claim, only ERC20 tokens were impacted in the alleged cyber-attack. That translates to less than one percent of total CoinSwitch funds,” the exchange said on X. “We have attempted to be in regular touch with WazirX since the day of the incident but have not been able to reach a solution to recover the funds that are stuck on their platform. So, we are now taking steps, including legal action.”
For now, CoinSwitch has not provided elaborate details on the legal action it is pursuing against WazirX.
CoinSwitch also assured its users that their funds on the platform were safe. The exchange said it would publish a transparency report in the coming days, as well.
“Overall, we hold funds that are 1.51 times the user assets invested through CoinSwitch. Our total assets, which are significantly more than the user holdings, give us the ability to absorb external shocks,” the exchange claimed.
Why we're forced to take legal action against WazirX?
— CoinSwitch: India's Simplest Crypto App :rocket: (@CoinSwitch) August 28, 2024
From the day of the incident, we have tried to be in constant touch with the WazirX team, seeking recovery of the funds that are stuck on their exchange. However, our efforts have not come to fruition, leaving us with no…
WazirX has not yet publicly reacted to the development. Gadgets360 has reached out to the crypto exchange for comment.
This week, WazirX's Singapore-based majority stakeholder entity, Zettai Pte Ltd. sought a moratorium — a breathing room — in order to restructure its finances. Zettai's application, filed in a Singapore court, and WazirX estimate that it may take at least six months to formulate a scheme, which if approved by the creditors and sanctioned by the Singapore Court, “would be legally binding on all relevant parties.”
On July 18, one of WazirX's multi-sig wallets placed under the oversight of Liminal Custody was hacked, leading to the theft of over $230 million (roughly Rs. 1,931 crore). Both Liminal and WazirX have claimed that their respective systems were not violated in this attack, citing internal investigations, leaving affected users confused and restless.
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 the funds of each user remain frozen for now as the probe into the incident continues. Crypto withdrawals on WazirX remain suspended for now.
North Korea's infamous Lazarus Group is the prime suspect in this hack. Confirmation from WazirX, however, remains awaited.
