WazirX to Distribute $230 Million Hack Loss Among Users, Sparking Controversy

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Indian crypto exchange WazirX plans to share the burden of a massive security breach with its customers, raising questions about fairness and responsibility in the wake of India’s largest cryptocurrency heist to date.

WazirX, a leading Indian cryptocurrency exchange, has unveiled a controversial plan to distribute a $230 million loss among its users following a major security breach. The Mumbai-based company halted trading last week after a cyber attack compromised nearly half of its reserves, marking India’s largest crypto heist to date.

>> Also read: WazirX Launches $23M Bounty to Recover Stolen Crypto After Major Hack

On July 18, blockchain security firm Cyvers detected suspicious activity originating from WazirX’s Safe Multisig wallet on the Ethereum network. Following the breach, the suspicious address engaged in several cryptocurrency swaps. In response, WazirX suspended its platform operations, filed a police report, and notified the Financial Intelligence Unit (FIU) and CERT-In.

To address the fallout, WazirX plans to resume operations within a week, implementing a “fair and transparent socialized loss strategy.” This approach involves rebalancing customer portfolios, returning only 55% of their holdings and locking the remaining 45% in USDT-equivalent tokens. Notably, this affects even users whose assets were not directly stolen.

The exchange offers two recovery options. Option A allows users to trade and hold assets, prioritizing them in recovery efforts but restricting withdrawals. Option B permits trading and withdrawals but places users at a lower priority for recovery. Users can switch between these options before making any trades or withdrawals.

WazirX founder Nishal Shetty addressed the community, stating the firm did not insure customer funds as viable options were unavailable. He warned that recovery could take years and might not fully restore losses.

Critics, including policy expert Nikhil Pahwa, argue that WazirX’s actions exceed typical exchange responsibilities, essentially redistributing assets among users. Customers have also questioned why the company isn’t using its profit reserves to mitigate losses.

The incident highlights the ongoing risks in the cryptocurrency market and raises questions about the responsibility of exchanges in protecting user assets.

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