- CoinSwitch initiates legal action against WazirX after a $230M cyberattack incident.
- WazirX files a moratorium in Singapore court to restructure crypto liabilities.
- CoinSwitch reassures users of secure funds and plans to publish proof of reserves.
CoinSwitch, a major Indian cryptocurrency platform, is suing WazirX, another big Indian crypto exchange, over a $230 million cyberattack. CoinSwitch says it has tried multiple times to get the funds back, but hasn’t been successful, so they are taking legal action.
In a recent series of posts, CoinSwitch explained the situation and assured users their funds are safe. After the hack, CoinSwitch used its own money to make sure all user crypto holdings were fully backed. The platform also plans to publish its proof of reserves for the second time this year to be more transparent.
According to CoinSwitch, the total funds stuck on WazirX amount to INR 12.4 crores (approximately $1.58 million), INR 28.7 crore (close to $4 million) in ERC20 tokens, and INR 39.9 crore (approximately $5 million) in other tokens.
This represents about 2% of all CoinSwitch funds. WazirX claimed that only ERC20 tokens were affected by the cyberattack, which translates to less than 1% of CoinSwitch’s total funds.
CoinSwitch explained that as an exchange aggregator, it holds a small amount of liquidity on third-party exchanges, including WazirX, to ensure seamless trading for its users. This accounts for 7% of CoinSwitch’s total funds. However, since 2022, CoinSwitch has primarily executed user orders through its own exchange, CoinSwitchX, reducing its reliance on external platforms.
Following the cyberattack, CoinSwitch continued to maintain a 1:1 ratio of user funds by drawing from its treasury. The company highlighted its financial strength and the robust governance practices that allowed it to absorb the impact of the incident. CoinSwitch reassured its users that its balance sheet remains strong, backed by significant investments from global firms like Andreessen Horowitz, Tiger Global, and Coinbase Ventures.
On the other hand, WazirX has taken steps to address the situation by filing for a moratorium with the Singapore High Court. The moratorium, filed under the Insolvency, Restructuring, and Dissolution Act (IRDA), is meant to offer them enough time to restructure the platform’s crypto liabilities through a Scheme of Arrangement. This process is expected to take at least six months, with updates provided to users throughout.
The moratorium application automatically gives WazirX 30 days of protection, during which the Singapore Court will decide on the duration and approval of the moratorium. WazirX has also announced plans to hold a town hall meeting in early September 2024 to discuss the moratorium and the Scheme in detail, allowing users to submit questions in advance.
The restructuring plan proposed by WazirX aims to distribute the available token assets proportionately among users based on their unsecured claims. The platform also plans to implement mechanisms to increase token recoveries, including tracing stolen tokens and exploring third-party partnerships.
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