Key Points
- WazirX has announced that it is unable to resume cryptocurrency withdrawals due to a significant depletion of its ERC-20 token holdings caused by a cyberattack.
- The exchange plans to pursue a Singapore consensus mechanism to facilitate a fair distribution of remaining assets, but the process would involve user voting and court oversight, which could delay access to funds.
- Starting August 26, 2024, WazirX users will be able to withdraw up to 66% of their INR balance in phases. The remaining 34% of the INR balance is currently frozen due to ongoing law enforcement investigations.
In the aftermath of a devastating cyberattack that resulted in the theft of over $230 million worth of cryptocurrencies, WazirX, one of India’s leading cryptocurrency exchanges, is navigating turbulent waters to regain trust with its users. On July 18, 2024, attackers exploited a vulnerability in one of the platform’s multisig wallets, exposing significant inconsistencies between the wallet interface and actual transaction details. The breach not only dealt a serious blow to the exchange’s operations, but also highlighted the ongoing risks associated with digital assets and the platforms that manage them.
Cryptocurrency withdrawal freeze and legal action
Post the attack, WazirX faced immense pressure from its user base who were unable to access their funds. WazirX today made an announcement about INR withdrawals and the ‘next steps’ the company is taking for cryptocurrency withdrawals.
Today’s announcement revealed the following facts: INR withdrawals will be resumed in phases from August 2nd.6, 2024, Cryptocurrency withdrawals are suspended indefinitely. The company said the theft depleted its holdings of ERC-20 tokens, meaning it could no longer meet its user obligations.
To address this shortfall, WazirX has announced that it will be pursuing the Singapore Restructuring Scheme, a legal framework that allows companies to restructure their debts and liabilities with the approval of a majority of their creditors or stakeholders. The move suggests that the exchange is not only looking to address its immediate liquidity crisis, but also to ensure that future asset distribution is legally binding and equitable across its user base.
WazirX founder Nishal Shetty mentioned that further details on cryptocurrency withdrawals from X will be provided next week.
However, this decision could be a double-edged sword. While it offers a path to resolution, it also prolongs uncertainty for users who want to regain access to their funds. The Scheme of Arrangement requires a formal approval process involving user voting and court oversight, which could extend the timeline for potential recovery.
INR Withdrawals and Regulatory Backlash
The situation with respect to INR balances presents a slightly more optimistic picture, albeit with a caveat. Zanmai Labs Pvt Ltd, the operating entity of WazirX that handles INR-related activities, was not directly affected by the cyberattack. However, regulatory issues have complicated the withdrawal process. Currently, around 34% of the INR balance is frozen due to ongoing investigations by Indian law enforcement agencies, a precautionary measure taken as part of a broader investigation into third parties associated with the platform.
WazirX has assured users that their funds are safe and that Zanmai is not the subject of any such investigation. Starting August 26, users will be able to withdraw up to 66% of their INR balance in stages, with the remaining frozen assets being made available once the investigation is over. Along with the reduced withdrawal fees, this phased withdrawal plan seems to be an attempt to appease users who are increasingly frustrated with the lack of access to their funds.
The long road to recovery
The cyberattack on WazirX has highlighted the vulnerabilities that even traditional cryptocurrency exchanges face. As the company pursues its proposed legal and operational strategy, it must also address the broader implications for trust and security of its digital asset platform. The decision to pursue the Singapore settlement is a sign that WazirX is aware of the delicate balance it must strike between legal compliance, user satisfaction, and financial stability.
The coming months will be crucial for WazirX. The exchange’s ability to navigate this complex environment will not only determine its survival, but will also serve as a touchstone for the broader cryptocurrency industry in India. With regulatory oversight increasing and user trust still fragile, WazirX’s response to this crisis could set a precedent for how digital asset platforms handle large-scale breaches in the future.
WazirX Cyber Attack, INR and Cryptocurrency Withdrawal FAQs
On July 18, 2024, WazirX experienced a massive cyberattack in which over $230 million worth of cryptocurrency was stolen. The attackers exploited a vulnerability in one of WazirX’s multisig wallets, resulting in a significant loss of ERC-20 tokens.
A cyberattack severely depleted WazirX’s ERC-20 token holdings, halting cryptocurrency withdrawals. The exchange currently lacks the assets to meet its user obligations and is pursuing a legal process known as the Singapore Settlement Scheme to resolve the issue.
WazirX has not provided a specific timeline for the resumption of cryptocurrency withdrawals. The exchange is going through legal procedures involving user voting and court oversight, which could take time. WazirX founder Nischal Shetty stated that full details on cryptocurrency withdrawals from X will be available next week.
The Singapore Restructuring Plan is a legal framework that will allow WazirX to restructure its obligations in a fair manner. Users will have the opportunity to vote and approve the restructuring proposal, which will be legally binding on all parties involved.
Yes, INR withdrawals will be resumed in a phased manner from August 26, 2024. However, due to regulatory issues, only up to 66% of the INR balance can be withdrawn. The remaining 34% of the INR balance is currently frozen by law enforcement agencies as part of an ongoing investigation.
From August 26, 2024 to September 8, 2024: Users can withdraw up to half of their 66% INR balance.
From September 9, 2024 to September 22, 2024: Users can withdraw the entire 66% of their INR balance.
According to WazirX, 34% of the INR balance has been frozen due to ongoing investigations by Indian law enforcement agencies. These funds have been frozen as a precautionary measure in relation to third-party investigations and WazirX is not a party to these investigations.
WazirX has not provided a specific timeline as to when the frozen INR balance will be released. The release of these funds is dependent on the conclusion of the ongoing investigation.
WazirX provides updates to its users through official channels, including announcements about the platform. It is important to keep an eye on these updates to stay informed about withdrawals and other developments.
Also Read: India Moves One Step Closer to Crypto Regulation After WazirX $230 Million Hack