TLDR
- WazirX, an Indian cryptocurrency exchange, suffered a $230 million hack on July 18, 2024, losing about 45% of its assets.
- The exchange proposed a “socialized loss strategy” and conducted a poll asking users to choose between two options for fund recovery.
- WazirX faced significant backlash from customers and industry players for its handling of the situation.
- The exchange clarified that the poll was not legally binding and was meant to gauge user opinions.
- There are concerns about the fairness of the proposed strategy and its impact on the broader crypto ecosystem in India.
Indian cryptocurrency exchange WazirX is under fire for its handling of a recent security breach that resulted in the loss of approximately $230 million in user funds.
The hack, which occurred on July 18, 2024, saw about 45% of the exchange’s assets drained, including significant amounts of popular cryptocurrencies such as Shiba Inu, Matic, Pepe, USDT, and Gala.
In response to the breach, WazirX proposed a “socialized loss strategy” aimed at distributing the impact among all users. On July 27, the exchange launched a poll asking customers to choose between two options.
- The first option would allow users to access 55% of their funds without the ability to withdraw, but with priority for potential recovery proceeds.
- The second option offered access to 55% of funds with withdrawal capabilities, but with second priority for recovery proceeds.
This approach, however, quickly drew criticism from both customers and industry leaders. Many viewed the strategy as unfairly penalizing users for the exchange’s security failure. Sumit Gupta, co-founder of rival exchange CoinDCX, argued that “the first contribution to losses should ALWAYS come from the Company.”
He added that WazirX’s handling of the situation “isn’t community first” and could harm other participants in the crypto ecosystem.
Other industry players echoed these sentiments. Giottus co-founder Arjun Vijay suggested that the poll was designed to force customers into choosing the option that best suited the exchange. Unocoin co-founder Dr. Sathvik Vishwanath expressed concern that the way the issue was being handled was “worsening the situation” for the entire crypto industry in India.
1. This poll is a preliminary step to understand your opinions.
2. This poll is not legally binding upon the users or WazirX
3. We will soon launch feedback form to collect more ideas
4. We are now looking into next steps based on all the feedback receivedThis is a majorā¦ https://t.co/tcdDjWzIYI
— Nischal (Shardeum) š¼ (@NischalShetty) July 29, 2024
Customers also voiced their frustration, with many questioning the legality and fairness of the proposed strategy. Some labeled it as “socialized loss, privatized profits,” while others asked why users with non-stolen tokens should be penalized.
Facing mounting backlash, WazirX and its co-founder Nischal Shetty issued statements clarifying that the poll was not legally binding. They described it as a “preliminary step to understand” customer opinions and promised to launch a feedback form to gather more ideas from users.
Shetty defended the socialized loss approach, arguing that it would allow the exchange to reopen and continue operations while exploring other options for recovering lost tokens and reimbursing affected users. However, critics maintain that this method unfairly shifts the burden of the hack onto customers.
Adding to the complexity of the situation, Indian news outlet The Print reported that India’s Enforcement Directorate (ED) had deposited nearly $1.1 million in seized crypto assets into a WazirX wallet account in January 2024, months before the hack occurred.
This revelation has led to further questions about the exchange’s security protocols and its relationship with regulatory bodies.
