WazirX is facing intense scrutiny from Indian government agencies after a significant crypto heist on July 18, which resulted in a loss of approximately $235 million. Officials from the Financial Intelligence Unit (FIU), Intelligence Bureau (IB), and CERT-In have met with the exchange’s founders to investigate the incident.
The exchange has taken steps to address its liabilities, including establishing a ten-member Committee of Creditors (CoC) set to launch by October 9.
Investigation and cooperation with authorities
In response to the hacking incident, a team of 8-10 officials engaged with WazirX executives in Mumbai. These meetings aim to probe the breach’s circumstances while efforts to recover the lost assets continue. WazirX has reportedly cooperated, providing authorities with transaction logs and blockchain addresses linked to the exploited accounts. However, no physical assets have been seized as of now.
The investigation extends beyond WazirX, with agencies reaching out to other stakeholders in the crypto industry. The FIU and its partners are gathering data on liquidity and transfer structures within the sector. This scrutiny comes amid growing concerns over the impact on retail investors, affected by the regulatory uncertainties within the crypto landscape.
Response and moratorium filing
The $235 million loss represents 45% of users’ assets on the platform, raising questions about WazirX’s security measures. The exchange has filed a four-month moratorium in Singapore to mitigate potential legal repercussions. This legal shield prevents aggressive actions against WazirX while it restructures its operations and liabilities. During this moratorium period, the exchange must disclose wallet addresses through a court affidavit, address inquiries, and share financial information.
Zemnai manages WazirX’s Indian operations and oversees the INR transactions, while Zettai Pte, based in Singapore, handles the crypto side of the business. Zettai has reportedly initiated discussions with eleven other crypto exchanges to explore recovery options.
Formation of the committee of creditors
WazirX has announced the establishment of a Committee of Creditors (CoC) by October 9 to guide the restructuring process. This committee will consist of ten members selected transparently, representing various creditor pools. The CoC is expected to provide advisory support and feedback to facilitate the recovery of assets.
Additionally, Zettai is in talks with major platforms and has received three proposals to offer capital injections, token distributions, airdrops, and profit-sharing schemes to assist in recovering user funds. The exchange aims to return between 52% and 55% of the remaining crypto assets to affected clients within six months.
The aftermath of the WazirX breach is further complicated by the hackers’ alleged use of Tornado Cash to launder the stolen funds, making recovery efforts more challenging for users impacted by the incident.