Class-Action Suit Over $235M WazirX Hack On July 18
India’s largest cryptocurrency exchange WazirX finally faced the worst form of cyber attack that transferred about 45% of user deposits from its hot wallet. The incident has attracted a class action lawsuit from thirty affected users represented by Supreme Court lawyer Aman Rehaan Khan to reclaim crypto funds worth around INR 5 crores or close to $600,000. The lawsuit, which is expected to be filed with India’s National Consumer Disputes Redressal Commission by mid-November, has contended that the move of WazirX to file for restructuring in Singapore was outside the law.
Users Sue WazirX for Mismanagement and Non-Disclosure
The plaintiffs claimed that is not a part of the original user agreement that included them parent company, Zettai Pte Ltd, and therefore the Singapore filing was unauthorized. Khan says this move bypasses user consent through Zettai. He adds that users were never informed about the freeze on their funds, which only increased their list of grievances. That included about one-third of users’ cash balances, he said, leaving them completely in the dark over the security and accessibility of their assets.
Increasing Legal Scrutiny Against WazirX
Aside from the class-action lawsuit, WazirX has faced increasing scrutiny over security protocols. In August, CoinSwitch co-founder Ashish Singhal filed a complaint regarding the platform’s security. Another complaint was filed in October seeking a formal investigation into the hack. That development adds to the legal headaches of WazirX-which recently received a four-month moratorium from legal claims as part of its ongoing restructuring process in Singapore.
Financial Authorities and Security Investigations
It reportedly joined the investigation into the platform’s operations for any links to money laundering or terrorism financing by India’s Financial Intelligence Unit, tasked with monitoring and analysis of financial data. In response, WazirX has provided server logs, transaction histories, and blockchain data related to the stolen assets to the relevant authorities. On October 25, the exchange announced that it was in search of a new custodian with increased insurance to better protect user funds.
What is the future of WazirX after back-to-back lawsuits and security incidents? Nischal Shetty and Sameer Mhatre-founded WazirX was one of the largest virtual currency exchanges in India. However, the turbulent period that the platform navigated after the hack may ding confidence in it. A slew of lawsuits, increased scrutiny, and further investigations into possible wrongdoing faces the exchange, raising questions about its future course.
