CoinSwitch takes legal action against WazirX

• CoinSwitch sues WazirX over $9.7M in stuck assets after a $230M cyberattack.
• WazirX seeks a 30-day moratorium to restructure and address frozen withdrawals.
• WazirX has allowed partial INR withdrawals, but crypto withdrawals remain paused.

CoinSwitch, a leading cryptocurrency exchange in India, has initiated legal proceedings against its competitor, WazirX, following a cyberattack in July that resulted in the theft of approximately $230 million worth of assets.

The legal action comes as WazirX seeks a 30-day moratorium from Singapore’s High Court to restructure its operations and address user withdrawals, which remain largely frozen.

CoinSwitch fitting for $9.7M stuck in WazirX’s platform

The cyberattack on WazirX, which took place on July 14, has sent shockwaves through the cryptocurrency community, particularly in India. The attack led to the theft of $230 million worth of cryptocurrency assets, primarily Ethereum-based ERC-20 tokens stored in WazirX’s hot wallets.

In the immediate aftermath, WazirX suspended all withdrawals, leaving users unable to access their funds and sparking widespread concern and frustration.

WazirX, which claims to be India’s largest cryptocurrency exchange, has since allowed partial INR withdrawals, but crypto withdrawals remain paused indefinitely.

CoinSwitch has stepped in to retrieve its assets, worth approximately $9.7 million, that are stuck on the WazirX platform. The funds include Rs 12.4 crore in Indian rupees, Rs 28.7 crore in ERC-20 tokens, and Rs 39.9 crore in other tokens, accounting for about 2% of CoinSwitch’s total holdings.

Despite numerous attempts to resolve with WazirX, CoinSwitch claims that the rival exchange has been unresponsive, leaving them with no option but to pursue legal action.

It’s been over a month since WazirX, a major crypto exchange operating in India, claimed that a cyber attack on their platform led to the theft of $230 million (~ Rs 2000 cr) worth of funds.

We have attempted to be in regular touch with WazirX since the day of the incident but…

— CoinSwitch: India’s Simplest Crypto App 🚀 (@CoinSwitch) August 28, 2024

CoinSwitch has, however, assured its users that their funds remain safe, stating that it has utilized its own treasury to ensure a 1:1 ratio for every user’s crypto holding on its platform. The company also plans to publish its proof of reserves for the second time this year to maintain transparency.

WazirX is seeking a court-approved breather

In response to the escalating situation, WazirX has filed for a 30-day moratorium with Singapore’s High Court, which, if approved, would grant the exchange temporary relief from its financial obligations.

This breathing space, as WazirX’s parent company Zettai, which operates WazirX in India, described it, is essential for the platform to progress with its restructuring plans.

The restructuring is aimed at addressing users’ cryptocurrency balances and facilitating their recovery.

While the filing is not equivalent to bankruptcy protection, it is a strategic move to prevent insolvency and ultimately reopen withdrawals.

A hearing date for the moratorium request has not yet been scheduled, leaving WazirX’s future uncertain as it navigates both the legal challenge from CoinSwitch and the need to restore its users’ trust.

CoinSwitch’s legal action and WazirX’s response highlight the precarious nature of the cryptocurrency industry, where platform security and user trust are paramount.

As the situation develops, the outcome of these legal and restructuring efforts will have significant implications for the broader crypto community in India and beyond.