Indian Judiciary Strengthens Crypto Custody Standards, Ensuring Investor Recourse

The Bombay High Court has ruled that CoinSwitch, an Indian cryptocurrency exchange, is entitled to recover assets stolen during the 2024 WazirX hack, reinforcing custodial liability standards in India's crypto sector. On October 9, 2025, Justice Somasekhar Sundaresan dismissed WazirX operator Zanmai Labs' appeal against an arbitration order, mandating the provision of bank guarantees totaling ₹45.38 crore (approximately $5.4 million) to secure CoinSwitch's claims. This decision follows a cyberattack in July 2024, which resulted in the theft of $234 million in ERC-20 tokens from WazirX's multi-signature wallets, with CoinSwitch losing 40.5% of its frozen funds on the platform Full Source Title^[1].

The court rejected Zanmai Labs' argument that cybersecurity responsibilities lay with Binance under a 2019 acquisition agreement, emphasizing that custodial obligations cannot be transferred to third parties. "If assets are held in the custody of a person under an agreement, it is for the person in whose custody those assets are held to be accountable for the custody of those assets," the judgment stated. The tribunal had previously applied a 45% haircut to CoinSwitch's ERC-20 token holdings-the specific asset stolen-while protecting other assets from WazirX's proposed loss distribution scheme Full Source Title^[1].

Legal experts highlighted the ruling's significance as a precedent for investor protection. Navodaya Singh Rajpurohit, a legal partner at Coinque Consulting, noted that the court upheld the Wander v. Antox standard, which limits appellate interference unless findings are "perverse or implausible." The judgment also clarified that Zettai, WazirX's parent company, had no contractual role in the dispute, dismissing claims of ambiguity between Zettai and Binance Full Source Title^[1].

The ruling strengthens India's legal framework for crypto custody, requiring exchanges to implement robust security measures and transparent practices. CoinSwitch's ability to recover ₹62 crore (approximately $7.8 million) in stolen assets underscores the judiciary's growing familiarity with blockchain's traceability. This decision may influence future cases involving custodial breaches and investor compensation, marking a critical step toward accountability in India's crypto ecosystem .