Summary:
- Customer Losses: WazirX customers may lose at least 43% of their funds, with the best-case recovery scenario estimated between 55% and 57%.
- Restructuring Plan: WazirX has sought six months’ protection from a Singapore High Court to restructure its liabilities and distribute remaining assets.
- Hacking Incident: The July hack, the largest cryptocurrency theft in India, has severely impacted WazirX, leading to this ongoing crisis.
- Dispute with Binance: WazirX’s restructuring efforts are complicated by an ongoing legal dispute with Binance, affecting potential capital raises.
- Legal Pressure: WazirX faces increasing legal challenges, including a recent lawsuit from CoinSwitch to recover $9.7 million in stuck assets.
In the aftermath of a devastating $234 million hack in July, customers of WazirX, one of India’s prominent cryptocurrency exchanges, are bracing for significant financial losses. According to George Gwee, a director at Kroll, the restructuring firm working with WazirX, customers are unlikely to recover more than 57% of their funds, with a minimum loss of 43% expected. Gwee shared these estimates during a recent press briefing, highlighting the challenges ahead for WazirX as it navigates through its ongoing restructuring process.
Last week, WazirX petitioned the Singapore High Court for six months’ protection to facilitate the restructuring of its liabilities. The exchange plans to distribute the remaining token assets to users on a pro-rata basis in cryptocurrency. However, the company has yet to provide detailed plans on how profits from its revenue-generating products might be shared with affected users.
The hack, which occurred in July, marks the largest cryptocurrency theft in India to date and has sent shockwaves throughout the country’s crypto industry. Since the incident, WazirX has been under intense pressure to find ways to return funds to its customers. In response, the company initially proposed socializing the “force majeure” loss across all users, a controversial move that has drawn significant scrutiny.
During a press conference, WazirX representatives remained tight-lipped about their efforts to secure additional capital. The company is reportedly in talks with an unnamed “white knight” investor but clarified that any new capital would not be tied to equity due to an ongoing legal dispute with Binance, the world’s largest cryptocurrency exchange. This dispute dates back to late 2019 when Binance announced it had acquired WazirX. However, Binance later disputed this claim, leading to a public fallout that saw Binance terminate its technology services to WazirX in 2022.
The ownership dispute with Binance has further complicated WazirX’s restructuring efforts. When questioned about Binance’s stake in the company, WazirX representatives declined to comment. They also dismissed the possibility of selling WazirX as part of the restructuring process.
Adding to WazirX’s woes, CoinSwitch, another major Indian crypto exchange, has initiated legal action against WazirX to recover approximately $9.7 million worth of assets that are currently stuck on the platform. This lawsuit underscores the mounting pressure on WazirX as it struggles to navigate the financial and legal challenges following the hack.
The future of WazirX remains uncertain as it faces a complex web of legal disputes, customer dissatisfaction, and financial instability. As the exchange works through its restructuring process, the extent of the financial recovery for its customers remains a pressing concern.
Disclaimer:
The information provided on 13Desk is for informational purposes only and should not be considered financial advice. We strongly recommend conducting your own research and consulting with a qualified financial advisor before making any investment decisions. Investing in cryptocurrencies carries risks, and you should only invest what you can afford to lose. 13Desk is not responsible for any financial losses incurred from your investment activities.
