In a notable legal confrontation, CoinSwitch, a leading cryptocurrency exchange in India, has initiated legal action against its competitor WazirX in an effort to reclaim funds ensnared due to a cybersecurity breach on WazirX’s end. This incident led to the theft of $230 million in digital currencies.
This legal action takes place over a month since WazirX, amongst the most significant crypto trading platforms in India, disclosed the hacking event and suggested a divisive “socialized loss” policy, which intended to spread the financial losses amongst all of its users.
CoinSwitch, which provides a platform aggregating various exchanges, disclosed it has approximately ₹810 million ($9.65 million) in assets currently frozen on WazirX. This sum comprises ₹124 million in cash, ₹287 million in ERC20 tokens, and ₹399 million in assorted digital currencies.
“Despite our efforts to maintain ongoing communications with WazirX since the breach occurred, we’ve reached no viable agreement to liberate the frozen assets,” CoinSwitch mentioned in an extensive thread on X.
The Bangalore-based enterprise remarked that the assets stuck on WazirX account for around 2% of CoinSwitch’s total holdings. It further clarified that less than 1% of its portfolio was compromised by the hack, mainly affecting ERC20 tokens.
CoinSwitch, supported by prominent investors such as a16z, Coinbase, and Peak XV, has been utilizing its reserves to ensure users’ balances on its platform remain equivalent to at least a 1:1 ratio. The company also assured that its overall assets exceed users’ investments by 1.51 times.
The company allocates a modest share of its liquidity – about 7% of its reserves – to third-party exchanges, aiming to facilitate seamless transactions for its clientele.
The lawsuit filed by CoinSwitch underscores the persisting hurdles within India’s crypto sector, currently navigating through regulatory ambiguities and safety issues. The WazirX breach, deemed the largest crypto theft in India, has significantly undermined confidence in the marketplace.
Subsequent to the breach, WazirX announced its intention to recommence operations within a week, with a plan to return 55% of the customers’ funds while converting the remaining 45% into USDT-equivalent tokens.
Nischal Shetty, WazirX’s founder, admitted the absence of insurance coverage for customers’ deposits, attributing it to the unavailability of feasible insurance solutions. He also warned that the recovery process could be prolonged, with no assured success.
Shetty was unable to provide an immediate response to an inquiry for comment.
Compiled by Techarena.au.
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