Indian cryptocurrency exchange CoinSwitch has decided to take legal action against its troubled contemporary WazirX in an attempt to recover funds 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 (around $9.65 million) — were rescued thanks to WazirX. After one of WazirX’s multi-sig wallets was hacked in July, the cryptocurrency exchange froze all withdrawals, leading to CoinSwitch’s funds getting stuck. CoinSwitch said it used its own funds to ensure a 1:1 match ratio for users’ crypto holdings on its platform.
CoinSwitch said that as an exchange aggregator, it maintained seven percent liquidity on third-party exchanges. The exchange disclosed that it had Rs 12.4 crore in INR, Rs 28.7 crore in ERC20 tokens, and Rs 39.9 crore in other tokens held on WazirX. CoinSwitch is concerned that given WazirX’s controversial approach to financial restructuring, a complete recovery of these funds may not be possible.
“According to WazirX, only ERC20 tokens were affected in the alleged cyberattack. This amounts to less than one percent of CoinSwitch’s total funds,” the exchange said on X. “We have tried to be in regular contact with WazirX since the incident, but we have not been able to find a solution to recover the funds that are stuck on their platform. We are therefore taking steps now, including legal action.”
So far, CoinSwitch has not provided details on the legal action it is taking against WazirX.
CoinSwitch also assured its users that their funds on the platform are safe. The exchange also announced that it will publish a transparency report in the coming days.
“Overall, we have funds that are 1.51 times the size of user assets invested through CoinSwitch. Our total assets, which are significantly larger than user assets, give us the ability to absorb external shocks,” the exchange said.
Why are we forced to take legal action against WazirX?
Since the day of the incident, we have been trying to stay in constant contact with the WazirX team, trying to recover the funds that were stuck on their exchange. However, our efforts have not yielded any results, leaving us without…
— CoinSwitch: India’s Simplest Cryptocurrency App :rocket: (@CoinSwitch) August 28, 2024
WazirX has not yet publicly responded to the development. Gadgets360 has reached out to the cryptocurrency exchange for comment.
This week, WazirX’s Singaporean majority shareholder, Zettai Pte Ltd., filed for a moratorium — a breather — to restructure its finances. Zettai’s application, filed in a Singapore court, and WazirX estimate that it could take at least six months to formulate a plan that, if approved by creditors and approved by a Singapore court, “will be legally binding on all parties involved.”
On July 18, one of WazirX’s multi-sig wallets, which fell under the purview of Liminal Custody, was hacked, leading to the theft of over $230 million (around Rs 1,931 crore). Both Liminal and WazirX claim that their systems were not compromised in the attack, citing internal investigations, leaving affected users confused and anxious.
WazirX has suspended all trading services, withdrawals, and deposits 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 as an investigation into the incident continues. Cryptocurrency withdrawals on WazirX remain suspended.
The infamous North Korean Lazarus Group is the prime suspect in this hack. However, confirmation from WazirX remains awaited.
