Following the unfreezing of 66 percent of users’ Indian Rupee (INR) balances on August 26, there was a surge in withdrawals by WazirX users in urgent need of funds. However, the momentum has since slowed down, prompting the exchange’s team, including co-founder Nischal Shetty, to advise users to retrieve their INR balances from the platform while financial restructuring efforts are underway.
On July 18, WazirX faced a significant hacking incident where a multi-signature wallet under the oversight of Liminal Custody was compromised, resulting in a loss of over $230 million (approximately Rs. 1,900 crore). This incident led to financial distress for users, exacerbated by the exchange’s decision to suspend trading, withdrawals, and deposit services. Currently, crypto withdrawals on the platform remain suspended, and 34 percent of users’ INR funds are frozen pending the completion of the investigation.
WazirX has teamed up with a financial restructuring firm called Kroll in Singapore to assist in reorganizing its books. Kroll director George Gwee mentioned that users may only be able to recover up to 57 percent of their funds deposited on WazirX. The best-case scenario for funds recovery stands at 57 percent, while 43 percent may remain unrecoverable.
Last week, WazirX filed for a moratorium in a Singapore court to buy time for analysing its liabilities and capital restructuring. It could take up to six months before a restructuring scheme is finalized by the exchange. As of now, there is no definite timeline provided for when crypto withdrawals will resume on the platform. The company is in constant communication with relevant authorities to investigate the hack and find the responsible parties.
Confidential Details and Allegations
The WazirX team has avoided disclosing any information related to its relationship with Binance, calling such details confidential. Binance had previously claimed acquisition of WazirX in November 2019, but former Binance CEO Changpeng Zhao later stated that the transaction was never completed. WazirX accused Binance of spreading false and misleading information against it in the market.
Overall, the situation at WazirX appears to be complex and challenging, with users urged to withdraw their funds amidst the ongoing financial restructuring efforts. The exchange is working towards recovering as much user funds as possible, with collaborations with financial restructuring firms and legal proceedings being a part of the process. The uncertainty surrounding the timeline for resuming crypto withdrawals and the lack of transparency regarding the exchange’s relationship with Binance add further complexity to the situation.
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