WazirX Granted Extension Amid $234 Million Cyberattack Fallout

WazirX, once the leading cryptocurrency exchange in India, has received a crucial extension from the Singapore High Court as it navigates the aftermath of a significant $234 million cyberattack and a tumultuous year marked by growing user dissatisfaction. The court's decision to extend the moratorium provides temporary relief, safeguarding the firm from lawsuits by creditors and allowing it to further argue its case for a modified restructuring plan.

The legal reprieve offers WazirX a brief respite to resurrect its battered Scheme of Arrangement, a court-monitored restructuring framework aimed at reorganizing its operations and addressing claims from over 400,000 aggrieved users worldwide. The platform's troubles began in July 2024 when hackers exploited its security infrastructure, draining digital assets from customer wallets. This incident, one of the largest crypto heists in Asia that year, triggered a cascade of challenges for the exchange.

Further attempts to compensate affected users were marred by ambiguous communication and alleged internal divisions within its parent company, Zettai Pte Ltd. Additionally, the exchange faced increasing scrutiny from regulatory bodies regarding fund tracing processes and corporate governance procedures. In response, WazirX proposed transferring its operations to Zensui Corporation, a newly registered firm in Panama. The company asserts that this move would shield the exchange from Zettai's pending legal issues and enable the creation of recovery tokens, or IOUs, which would track unredeemed balances on the blockchain.

The idea behind these recovery tokens is to assist users in recouping 75 to 80% of their lost assets over the long term, depending on the platform's future earnings and the state of the general market. However, observers have expressed concerns about the unproven mechanism and its ability to guarantee prompt compensation. The restructuring plan, which garnered significant backing in April with over 93% of voting creditors approving it, faced skepticism and was not approved by the Singapore High Court last month due to concerns over transparency and governance. The continued existence of the company now hangs in the balance.

Without court approval, WazirX risks court-ordered liquidation, a process that legal experts warn could take years, depreciate the value through court costs, and significantly lower payback rates to creditors. The exchange has already cautioned that, in this scenario, it may take until 2030 to reimburse users. The court's ruling on Friday is seen as a pivotal moment for WazirX management to convince the court and its increasingly skeptical followers that a controlled recovery is still possible. The company stated, “We are awaiting the court’s directions on the next hearing and will share updates as soon as we have clarity.”

There is currently no scheduled date for the next round of proceedings, leaving thousands of users without access to their accounts nearly a year after the breach. WazirX faces a challenging road ahead, balancing the legal requirement to clean up its operations with the need to rebuild confidence in a crypto industry still reeling from recent failures. While the moratorium extension offers a glimmer of hope, it brings no guarantees until the court grants final approval. WazirX’s users remain locked out, their digital assets effectively frozen.

The next few weeks will determine whether WazirX has grounds to celebrate or face further setbacks. As trust erodes and user funds remain locked, the outcome of this case may not only define the future of this exchange but also set a precedent for investor trust in the troubled crypto industry over the next few years.