The WazirX hack is wreaking havoc on crypto — here’s how

Bitcoin’s trading pairs with the Indian rupee fell off a cliff. $100 million worth of SHIB was stolen from WazirX, sending the memecoin’s value plummeting.

Let’s be honest: Hacks are a fairly routine occurrence in the crypto world, with cybercriminals finding vulnerabilities with alarming regularity and stealing millions of dollars in the process.

However, bold exploits involving centralized exchanges have become somewhat less common in recent years, especially those involving hundreds of millions of dollars, and that’s what makes the recent events at WazirX so concerning.

This is India’s largest crypto platform and wastes no time in advertising on its website that it is “trusted” by over 15 million people. But now, it is out of pocket by $235 million. If alarm bells weren’t ringing already, that would be about half of the funds this exchange holds.

In a worrying development that has customers on edge, WazirX has confirmed what happened on X:

📢 Update: We are aware that one of our multi-signature wallets has experienced a security breach. Our team is actively investigating the incident. To ensure the safety of your assets, INR and crypto withdrawals will be temporarily suspended. Thank you for your patience and understanding.…

— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 18, 2024

But this attack had multiple knock-on effects, some of which were quite unexpected.

First, a significant portion of the stolen cryptocurrency was split into two cryptocurrencies: Shiba Inu and Ether.

Estimates suggest that around $100 million worth of SHIB has been taken, and is currently being aggressively offloaded on decentralized exchange Uniswap. Another $52 million worth of ETH is missing — but given that it is the world’s second-largest cryptocurrency, has plenty of liquidity, and is buzzing about ETFs being approved in the US, it is in a much better position to absorb the selling pressure.

Figures from CoinMarketCap show SHIB to be the worst performer by far on the 24-hour timeframe — it has lost 8.35% of its value at the time of writing. In comparison, ETH’s value is down just 0.38%.

Blockchain analytics firm Arkham Intelligence later confirmed that all of these SHIBs had been drained, posting on X:

UPDATE: WazirX Hacker has been removed from SHIB.

This morning, $102.1 million worth of SHIB was stolen from WazirX and sold in full by the attacker. pic.twitter.com/sjCSZJhdIv

— Arkham (@ArkhamIntel) July 18, 2024

At the time of writing, they continue to hold just 52 cents of MATIC alongside 43,800 ETH.

The exploit has also wreaked havoc on trading pairs that link major cryptocurrencies to the rupee. In dollar terms, Bitcoin has seen a fairly routine drop of 0.83% over the past 24 hours — but in India, the world’s largest digital asset has literally fallen off a cliff:

Source: TradingView

At the time of writing, BTC was trading at around INR 4.84 million on this exchange – around $57,869. That’s a discount of around 9.2% compared to the US markets. The panic is real.

Investigators are now trying to understand how the incident happened. Polygon Labs chief information security officer Mudit Gupta suggests that it was a “methodical and organized attack” that was planned well in advance:

WazirX stolen more than $230 million (INR 2,000 crore)

Secure multi-signatures have been compromised and dumped.

Hackers started hacking the chain at least 8 days ago and finally did it today.

A very methodical and organized attack points to North Korea as the hacker. picture.twitter.com/HziVY7dCoq

— Mudit Gupta (@Mudit__Gupta) July 18, 2024

They also warned that “the chance of partial recovery is high, the chance of full recovery is low” and that WazirX customers may suffer losses due to this.

Meanwhile, on-chain celebrity detective ZachXBT declared that this attack “once again bears the potential hallmarks of a Lazarus Group attack.” The allegations repeatedly suggest that this attack group was sponsored by the North Korean government and designed to evade economic sanctions.

ZachXBT received a significant reward from Arkham after providing “definitive evidence of a KYC-linked deposit address used by the exploiter to receive funds from WazirX.”

What’s next?

Attacks on exchanges cause great reputational damage and undermine customers’ trust in the process.

However, the WazirX incident in India could lead to even more aggressive regulation by the Indian government, which has been unwelcoming of cryptocurrencies from the start.

Even before this exploit, profits from crypto transactions incurred a punitive 30% tax — putting it on par with gambling. This was driven primarily by fears that they could undermine “macroeconomic and financial stability” — even recently re-elected Prime Minister Narendra Modi claimed that digital assets could “spoil our youth.”

It would also be fair to say that WazirX customers are quite frustrated when trying to get a response from the support team.

I have been trying to contact wazirx for over an hour.

Not very good customer service for someone who keeps $8,000,000 on your platform pic.twitter.com/w9i6HcnO6H

— Hugo Martingale (@HugoMartingale) July 18, 2024

Meanwhile, rival cryptocurrency exchanges based in India are working overtime to emphasize that customer funds are safe, no doubt a tactic to lure some customers away from WazirX.

The impact of this latest attack has not yet subsided, but the consequences will be severe.