In one of the key developments that have gripped India’s cryptocurrency landscape, leading crypto exchange CoinSwitch filed a lawsuit against its rival WazirX. This was an attempt to seek recovery of $9.65 million in assets that were trapped on the WazirX platform in the aftermath of a giant cyberattack. This case shows how Indian crypto market players have begun facing new challenges.
The Tussle between CoinSwitch and WazirX
The hack has its roots in July 2024, when one of the major virtual currency exchanges in India, WazirX, became the target of a cyberattack. All in all, this hack led to an estimated loss of $230 million, or approximately ₹1,900 crore. One of the other victims in this attack was CoinSwitch, another large player in the Indian crypto market. It had₹810 million ($9.65 million) of its assets stuck on the WazirX platform, which includes₹124 million lying in fiat currency,₹287 million in ERC20 tokens, and₹399 million in other cryptocurrencies.
Recovery Efforts Failed; Takes Legal Action
CoinSwitch tried several times to retrieve its stuck funds from WazirX, but nobody answered. Over a month has gone by with attempts to solve the situation, and CoinSwitch opted to go to court. It filed a lawsuit in order not to lose the funds in the mix as WazirX goes through its restructuring process. CoinSwitch is hopeful that the judiciary will expedite the process of recovery of its assets.
WazirX’s Response: Restructuring and a Request for Moratorium
The parent company of WazirX, Zettai, has filed for a moratorium thereafter in the High Court of Singapore since the cyberattack. This was done in order to give time to restructure the debts and make a plan that might provide some assets back. The plan advanced by Zettai would have the users of the platform, who will fall into the category of unsecured creditors, take an equitable distribution of whatever assets can be recovered. At minimum, this is a six-month process to restructure.
WazirX
Questionable Proposal: Socialized Loss
The suggestion to absorb the financial loss between all its users by WazirX has drawn a lot of criticism. It does not have any insurance cover for customer funds, which makes the suggestion more controversial. CoinSwitch, in particular, has been quite vocal in their criticism, citing the need for urgency in recovering their assets to ensure that liquidity is maintained for business to keep running smoothly for their users.
Impact on the Indian Crypto Industry
The fight between CoinSwitch and WazirX brings into sharp focus the battering of India’s cryptocurrency industry. Already reeling under regulatory uncertainty, the sector has been grappling with frequent security issues. The incident, one of the largest crypto-heists in India’s history so far, has sent jitters through a market already losing trust.
However, CoinSwitch has also tried to assure its users that the hit on its operation is pretty minimal. The amount of money stuck is less than 1% out of all user holdings. The firm has managed to maintain a 1:1 ratio with user holdings through its own treasury reserves. Thus, its operation remains unhampered.
What’s Next: Road to Recovery
The outcome of this legal tussle, which will set a great precedent for the future of cryptocurrencies in India, is something the entire crypto community in India will be watching with bated breath. Both companies stand to lose a lot from this, and it might just set a great precedent for the future of cryptocurrencies in India.
Conclusion
At the same time, CoinSwitch is still trying to reclaim its assets through court proceedings, while WazirX is facing the challenge of dealing with financial restructuring in a very tedious way. It remains to be seen if CoinSwitch will come out on top in the case, but it is already rattling the still-developing regulatory framework for India’s cryptocurrency business.
