By crypto.news | Created at 2024-10-26 12:31:10 | Updated at 2024-10-26 14:17:49
2 hours ago
A group of victims is preparing a lawsuit against crypto exchange WazirX following the $235 million hack.
Thirty victims of the July 18 hack on WazirX, which saw roughly 45% of user funds drained from the platform’s hot wallet, are preparing to file a class-action lawsuit with the National Consumer Disputes Redressal Commission in India, according to a local media report.
The victims seeking to recover crypto assets worth over INR 5 crores (around $600,000) argue that the exchange acted outside its legal boundaries.
The $235 million hack impacted roughly 4 million users, compelling the exchange to seek a Scheme of Arrangement in Singapore, a restructuring process under local insolvency laws. WazirX managed to secure a four-month moratorium, temporarily halting any legal claims against it.
The lawsuit, set to be filed by mid-November, hinges on the claim that WazirX’s agreement with its users was through its Indian entity, Zanmai Labs Pvt. Ltd.
Victims weren’t informed of frozen cash balances
Supreme Court lawyer Aman Rehaan Khan is representing the victims.
Khan argues that the exchange’s decision to file for asset restructuring in Singapore through its parent company, Zettai Pte Ltd, was not legally justified.
“Zettai was never a party to the user agreement,” said Khan.
Singapore-based Zettai, oversees the exchange’s cryptocurrency assets, while Zanmai Labs handles cash deposits for Indian users. Initially, Zanmai was in charge of WazirX’s operations in India, but it’s now fully owned by Zettai. According to WazirX’s website, Zettai took over the platform’s assets following an ownership dispute with Binance.
Nearly a month after the attack, WazirX announced that it would allow users to withdraw 55% of their cryptocurrency holdings and 66% of their cash deposits. However, it was the first time the exchange revealed that one-third of users’ cash balances had been frozen due to separate legal disputes and ongoing investigations by law enforcement.
Khan added that users were not informed about cash balances being frozen by a third-party entity, which he claims is another violation warranting compensation and penalties.
Khan expects more victims to join by the time the lawsuit is filed.
WazirX under fire
WazirX, one of India’s largest cryptocurrency exchanges, has faced significant scrutiny and legal challenges in recent years.
Besides the upcoming lawsuit, the report noted that two other cases have been filed against the exchange in the Delhi High Court. On Aug. 28, CoinSwitch co-founder Ashish Singhal accused the exchange of security lapses. Another investor, Jaivir Bains, filed a petition on Oct. 18, calling for an investigation into the hack.
WazirX filed for a moratorium in September as part of a restructuring process in Singapore where the current owner is based. The company won the moratorium and now has four months of immunity from any legal proceedings against it.
Further, a separate group of 11 users plan to pursue legal action once the moratorium has expired.
India’s Financial Intelligence Unit — an agency tasked with analyzing and disseminating financial information related to money laundering and terrorist financing activities — is reportedly probing WazirX.
The exchange has shared server logs, transaction records, and blockchain addresses related to the stolen funds with authorities.
On Oct. 25, the exchange announced it was looking for a new custodian partner that could provide insurance for user funds in a bid to enhance platform security.
WazirX was founded by former CEO Nischal Shetty and CTO Sameer Mhatre.
