WazirX Investors Seek Supreme Court After NCDRC Dismissal

The National Consumer Disputes Redressal Commission (NCDRC) has declined to hear a case from a group of WazirX investors who suffered losses due to the $234 million crypto hack. The commission stated that since crypto transactions aren’t fully regulated in India, it cannot investigate the matter. The NCDRC stated that since cryptocurrencies are neither legal tender nor officially recognized as investment assets in India, the lawsuit’s claim of financial fraud against WazirX lacks legal basis.

The investors’ lawyer, Aman Rehaan Khan, plans to approach the Supreme Court next and seek recovery of lost funds and criminal proceedings against the entities and individuals involved. The lawyer said that although the decision was a setback, there were some positives. The consumer forum agreed that cryptocurrencies are considered ‘goods’ under the Consumer Protection Act and are also treated as property under the Income Tax Act. The complaint was filed by 40 investors who claim to have lost around INR 12 crore (about $1.4 million) in cryptocurrency.

Crypto isn’t legal tender in India, but the government taxes crypto profits at 30%. All exchanges must register with the Financial Intelligence Unit (FIU) under the finance ministry. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was planned but never introduced, leaving the crypto space unregulated. Now, the Supreme Court’s decision is awaited. In 2020, it lifted the RBI’s 2018 ban on crypto trading and later criticized the government for not setting clear rules on crypto trading and fraud investigations.

WazirX, led by Nischal Shetty, is planning a major restructuring to help customers recover some of the $234 million lost in the hack. WazirX recently pledged to return 85% of the lost assets to investors through its Singapore court-approved restructuring plan. The company has held eight online town halls with customers but is yet to announce the next steps. The plan involves releasing $284 million in liquid assets and issuing recovery tokens to affected users. After rebalancing its liabilities, these assets will be distributed as tokens to creditors. The restructuring also includes reactivating the WazirX platform with a new decentralized exchange and enhanced features. Profits from the first three years after reactivation will be used to buy back recovery tokens. This plan has been approved by the Singapore Court, and WazirX has completed the rebalancing process, allowing users to claim their stolen crypto by April.

The dismissal of the lawsuit by the Consumer Court has left victims feeling disheartened, as they had hoped for some form of redressal through the legal system. The victims have now announced their intention to approach the Supreme Court in April, seeking a higher level of judicial review and potentially a more favorable outcome. The WazirX hack has raised serious concerns about the security measures in place at cryptocurrency exchanges. The incident has highlighted the vulnerabilities that exist within the digital currency ecosystem, prompting calls for stricter regulations and enhanced security protocols. The victims, who have suffered substantial financial losses, are determined to pursue justice and hold the exchange accountable for the breach. Their decision to take the case to the Supreme Court underscores the gravity of the situation and the need for a thorough investigation into the hack.

The dismissal of the lawsuit by the Consumer Court has also sparked a broader debate about the effectiveness of existing legal frameworks in addressing cybersecurity issues. Many experts argue that the current laws are inadequate in dealing with the complexities of digital crimes, particularly those involving cryptocurrencies. The victims' plan to approach the Supreme Court is seen as a crucial step in pushing for stronger legal protections and more robust regulatory measures. The WazirX hack has had far-reaching implications for the cryptocurrency industry in India. It has not only eroded investor confidence but also raised questions about the reliability of digital currencies as a secure investment option. The incident serves as a stark reminder of the risks associated with cryptocurrencies and the importance of implementing stringent security measures to safeguard against such breaches. The victims' resolve to seek justice through the Supreme Court is a testament to their determination to hold the exchange accountable and to ensure that similar incidents do not occur in the future.