WazirX Faces User Backlash Over Fund Management After $234 Million Hack

After a significant hack on WazirX leading to $234 million in losses, users voice concerns during a September 2024 webinar, questioning fund management and withdrawal timelines.

In the wake of a major hack that resulted in the loss of approximately $234 million in assets, users of WazirX, one of India’s largest cryptocurrency exchanges, are growing increasingly concerned about the platform’s transparency and future operations. A webinar held on September 25, 2024, provided a space for affected users to voice their frustrations, primarily focused on the ability to manage and withdraw their remaining funds.

Key Concerns: Fund Handling and Withdrawal Delays

Many participants in the webinar questioned how WazirX and its parent company, Zettai Pte Ltd, were handling user funds in the wake of the breach. Users also expressed frustration over the delays in accessing their funds, with WazirX explaining that withdrawals will not be permitted until a restructuring proposal, known as the “Scheme,” is approved by creditors and sanctioned by the High Court of Singapore. This process is expected to take at least six months.

The response left users anxious, especially in light of allegations that WazirX and its associated entities, including Zettai and Nischal Shetty, had used ₹100 crores of user funds for legal processes despite previously asserting a 1:1 proof of reserves.

WazirX’s Financial Health and Asset Deficit

Adding to the concerns, WazirX clarified that Zettai, the entity managing the platform’s operations, reported $546.5 million in liabilities as of July 18, 2024, with only 55% of these liabilities covered by assets. The 45% deficit has left users questioning the platform’s financial stability and its ability to recover their investments.

Users also claimed that WazirX was hiding its financial position, despite other exchanges, such as BingX, successfully managing similar crises. However, WazirX emphasized that operational, legal, and investigative expenses are necessary to facilitate the voting process for the restructuring plan, maintain platform operations, and recover stolen funds.

Legal Proceedings and the Path Forward

WazirX’s legal and operational challenges extend beyond the hack. The platform is currently engaged in a dispute with Binance, its former partner, which handled WazirX’s cryptocurrency operations until January 2023. After Binance’s termination of services, Zettai Pte Ltd, based in Singapore, took partial control of crypto assets, but it remains unclear how deposits and other assets are managed.

One user raised concerns about why WazirX allowed large withdrawals after the cyberattack while restricting Indian users from accessing their funds. In response, WazirX clarified that the assets were stolen via a cyberattack and not from user withdrawals.

Rescue Financing and Future Plans

Despite these challenges, WazirX is actively seeking rescue financing from potential partners to cover its costs and maintain operations. The platform remains committed to resolving its financial difficulties, facilitating user withdrawals post-restructuring, and resuming trading once a clear path is established.

Takeaways for Users

  • Fund withdrawal delays: Users cannot withdraw funds until the restructuring plan is approved, which could take six months.
  • Financial instability: WazirX faces a significant asset deficit, covering only 55% of its liabilities.
  • Rescue efforts underway: WazirX is actively seeking partners to provide rescue financing and ensure platform sustainability.

As the platform navigates this challenging time, users are encouraged to stay informed and actively participate in future updates on the restructuring process.

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