Wazirx Files For Debtor Protection As Hackers Continue To Launder Millions

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As an analyst with over two decades of experience in the financial industry, I’ve seen my fair share of ups and downs in the market. The WazirX saga is one that has caught my attention, not just for its dramatic turn of events but also because it serves as a stark reminder of the risks inherent in the crypto space.

On July 18, 2024, a significant cyber attack targeted WazirX, India’s biggest cryptocurrency trading platform, resulting in the theft of approximately half of the company’s total assets, amounting to $235 million. As a response, the exchange halted all transactions, preventing users from withdrawing their funds. More recently, following the resumption of asset withdrawals by WazirX, an address associated with a hacker who infiltrated WazirX was traced moving $6.5 million worth of stolen ether to Tornado Cash

Originally on a course to be India’s first cryptocurrency startup valued at over a billion dollars, the meteoric rise of WazirX has taken a sudden and drastic turn. Established by Nischal Shetty, this platform grew rapidly with the goal of making cryptocurrency trading accessible for Indians

However, the July security incident resulted in a substantial loss of cryptocurrencies, estimated at approximately $235 million. This loss encompassed $97 million worth of Shiba Inu, $52.6 million in Ethereum, and other digital currencies. As a response to the breach, WazirX swiftly halted all transactions, which remained frozen until August 26 when the company announced that its users could withdraw only one-third of their available Indian Rupee (INR) balances

Users of the exchange quickly raised angry questions about what had happened to the rest of their balances at which time WazirX announced its 2nd phase of INR withdrawals on Sept. 3, 2024, through which users could withdraw up to the 66% limit of their available INR balances.

On September 2nd, an unidentified hacker from WazirX reportedly transferred approximately $6.5 million in stolen Ether through the sanctioned cryptocurrency mixer Tornado Cash. This transfer was made in multiple installments, with each batch consisting of around 100 Ether, as per Arkham Intelligence’s analysis, a blockchain research platform

For the first time, it has been discovered that the perpetrators of the WazirX hack may have employed Tornado Cash as a means to carry out their transactions. This decentralized platform has gained notoriety for facilitating secretive and potentially illegal transactions on Ethereum. It’s worth noting that this same platform has previously been used by the well-known North Korean Lazarus Group to shift their illicitly obtained cryptocurrency. As a result, some cryptocurrency analysts are speculating that the Lazarus Group could be behind the WazirX hack. If this is true, investigators may find it challenging to trace the transaction records

WazirX Files For Debtor Protection

In light of the developing situation following the hack, Zettai Pte Ltd, WazirX’s parent company based in Singapore, has submitted an application to the High Court of Singapore on August 27, 2024. This application seeks a moratorium under section 64 of the Insolvency, Restructuring, and Dissolution Act 2018. The aim is to use this protective measure to reorganize its debts through a plan called a scheme of arrangement

WazirX has enlisted Kroll, a restructuring firm, to assist with their legal processes. On September 2, 2024, during a community meeting (which was also attended by Kroll), they participated in the call with the exchange’s users. Notably, Kroll is the same company that has been overseeing the liquidation process for BlockFi

According to a Kroll representative, there are ongoing negotiations aimed at raising more funds so that we can return money to our users. Another possibility is recovering the stolen cryptocurrency and the ongoing investigation related to this matter. Lastly, if we manage to reach a restructuring agreement with our creditors through the platform, we hope to generate profits in the future, which will be distributed among the creditors

However, let’s make it clear that this journey won’t be smooth sailing for exchange users. The entire process is projected to last a minimum of six months, and it’s estimated that only about 55-57% of the total funds in crypto terms will be restored to users once the restructuring is complete

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2024-09-04 16:33