The Indian digital currency platform WazirX has stirred the crypto world by unveiling a divisive scheme on a recent Saturday to apportion the $230 million deficit from its security lapse across its entire user base. This decision has roiled the cryptocurrency community in the region.
Following a cyber-attack that saw the platform losing close to half of its assets in what is being called the largest cryptocurrency theft in India, the Mumbai-based exchange halted all trading last week. WazirX has now devised a plan aiming to restart services in about a week, proposing a “fair and transparent socialized loss strategy” for evenly spreading the financial impact among its clientele.
To manage the fallout, WazirX plans to adjust user balances on its platform, restoring 55% of their assets while converting the remaining 45% into locked USDT-equivalent units. This measure will affect all customers, even those whose tokens were untouched by the hack, with the company explaining that “users who had ‘not stolen’ tokens will also only recoup 55% of those assets.”
The breach led to the theft of more than 200 various cryptocurrencies, primarily comprising notable tokens like Shiba Inu (SHIB), Ethereum, MATIC from Polygon, and the meme coin Pepe, as detailed by blockchain analytics shared by the independent tracker Lookchain.
This incident, occurring on July 18, was facilitated through a mismatch between the transaction content shown by the multisignature wallet service Liminal and the transactions’ true nature, WazirX points out.
Looking ahead, WazirX has introduced two recovery paths for its users. Option A prioritizes users for recovery while limiting their ability to withdraw funds, whereas Option B allows for both trading and withdrawals but puts these users at a lower recovery priority. Users have the flexibility to switch options, provided they meet specific prerequisites.
“Choosing Option B means you can continue trading and withdrawing, though we will prioritize recovery for those who opted for Option A initially. Switching to Option A is possible any time before engaging in trades or withdrawals,” further explains WazirX.
In a crucial meeting with the community on Friday night, WazirX’s creator, Nishal Shetty, acknowledged the absence of insurance for customer funds, citing a lack of feasible options. He tempered expectations around the recovery process, warning it could be a lengthy endeavor.
Nikhil Pahwa, a prominent policy advocate and editor of MediaNama, critiqued WazirX’s approach, noting, “WazirX is effectively managing the crypto assets held on behalf of its users, indicating its role surpasses that of just an exchange or custodian by directly reallocating user funds.”
Several clients also questioned WazirX on Saturday about why the company is not utilizing its earnings reserve to offset customer losses or at least mitigate the financial blow.
Compiled by Techarena.au.
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