Indian exchange CoinSwitch has sued the rival cryptocurrency network WazirX. CoinSwitch claims that it is pursuing legal action to reclaim the money stranded on the site operated by Nischal Shetty.
The cryptocurrency exchange managed by Ashish Singhal, CoinSwitch, stated that more than a month has passed since WazirX, a significant player in the Indian market, reported that $230 million (about Rs 2,000 crore) in cash had been stolen through a cyberattack on their website.
CoinSwitch now holds around 2% of the total money: Rs 12.4 crore in Indian rupees, Rs 28.7 crore in ERC20 tokens, and Rs 39.9 crore in other tokens trapped on WazirX.
The main WazirX shareholder business, Zettai Pte Ltd., asked for a moratorium this week so that it could rearrange its finances and give itself some breathing room. Zettai’s plea, filed with a Singaporean court, states that WazirX and the business anticipate that, should the plan be approved by the Singaporean court and approved by the creditors, it might take at least six months to develop.
WazirX said on Wednesday that it has applied to the Singapore High Court for a moratorium to allow for restructuring. The business intends to implement an arrangement that distributes available assets among users in proportion to their status as unsecured creditors.
The company believes that the procedure will take at least six months. During that time, it will look for ways to improve token recovery. The company’s clients include “various” Indian law enforcement organizations.
On July 18, WazirX suffered a significant security compromise in one of its multisig wallets that resulted in the loss of almost 45% of its holding assets. Following that, it put a halt to cryptocurrency trading and withdrawals on its platform. Earlier this week, WazirX had only partially opened up INR withdrawals.
WazirX announced last month that it would restart operations within a week of the assault and that it would refund only 55% of customer holdings, locking the remaining 45% in tokens worth USDT.
Previously, Nischal Shetty, the creator of WazirX, acknowledged that the company needs to protect consumer cash, claiming a lack of practical alternatives. He issued a warning, saying that success was not certain and that recovery efforts may take years.
Shetty did not answer a request for comment right away.
Indian cryptocurrency exchange WazirX users are unlikely to get their money back as a whole.
A legal advisor for the firm stated on Monday that it is improbable that WazirX customers will receive their complete refunds as a result of the current restructuring process, which comes amid ongoing legal challenges with CoinSwitch.
According to George Gwee, a director at the restructuring company Kroll, which is working with WazirX, it is improbable that any customer’s money would be recovered to the tune of at least 43%. Last week, WazirX requested six months of protection from a Singapore High Court as it reorganized its obligations.
As Gwee informed reporters, the best-case scenario calls for a recovery of “anywhere between 55% and 57% of the funds.” According to the statement, WazirX’s top goal after restructuring will be to allocate customers’ remaining token holdings proportionately via cryptocurrency. The firm stated that it is in talks to split the profits from its revenue-generating goods, but it did not provide any specifics.
The July attack, which has shocked the nation’s cryptocurrency sector, is the biggest bitcoin heist in India to date. Since then, the business has been frantically trying to figure out how to give its consumers their money back. It said in July that it would share the damage attributed to “force majeure.”
Representatives from WazirX steered clear of many inquiries during the press conference about the company’s efforts to raise financing.
WazirX finds itself in a precarious situation as it faces mounting challenges, including a lawsuit from CoinSwitch, a prominent Indian cryptocurrency exchange. CoinSwitch is seeking to reclaim approximately $9.7 million in funds left on WazirX’s platform. This legal action adds to the pressure on WazirX, which is already dealing with complications stemming from its troubled relationship with Binance, the world’s largest cryptocurrency exchange.
Binance initially claimed to have acquired WazirX in 2019, only to later backtrack on the claim. The situation escalated in 2022 when Binance withdrew its tech services from WazirX following public criticism. Despite the uncertainty, WazirX’s representatives have remained tight-lipped on whether Binance owns the company, and they dismissed the idea of selling WazirX as part of any reorganization.
Additionally, WazirX’s negotiations with an anonymous white knight are ongoing, but any potential funds raised will not involve equity, primarily due to a dispute with Binance. Meanwhile, WazirX’s representatives have been hesitant to comment on whether the company might pursue legal action against Binance and Liminal, the multi-signature wallet provider implicated in a recent breach.
As WazirX navigates these challenges, the CoinSwitch lawsuit underscores the growing legal and financial pressures facing the Indian cryptocurrency exchange.
