Victims sue WazirX over $235m hack in class-action lawsuit

A group of victims are preparing to file a lawsuit against crypto exchange WazirX following a $235 million hack.

According to a local media report, 30 victims of the attack on WazirX on July 18, in which around 45% of user funds were emptied from the platform’s hot wallet, are preparing to file a class-action lawsuit with the National Consumer Disputes Redressal Commission in India. .

Victims seeking to recover crypto assets worth Rs 5 crore (about $600,000) argue that the exchange acted outside its legal boundaries.

The $235 million hack affected nearly 4 million users and forced the exchange to seek a Plan of Arrangement, a restructuring process in Singapore under local bankruptcy laws. WazirX managed to secure a four-month moratorium, temporarily halting any legal claims against it.

The lawsuit, scheduled to be filed in mid-November, alleges that WazirX’s agreement with its users was violated by Indian startup Zanmai Labs Pvt. It is based on the claim that it was done through. Ltd.

Victims were not informed about their frozen cash balances

Supreme Court lawyer Aman Rehaan Khan is representing the victims.

Khan argues that the exchange’s decision to file for asset restructuring in Singapore through its parent company Zettai Pte Ltd was not legally justified.

“Zettai was never a party to the user agreement,” Khan said.

Singapore-based Zettai oversees the exchange’s cryptocurrency holdings, while Zanmai Labs handles cash deposits for Indian users. Initially, Zanmai was responsible for WazirX’s operations in India, but it is now fully owned by Zettai. According to WazirX’s website, Zettai took over the platform’s assets following an ownership dispute with Binance.

About a month after the attack, WazirX announced that it would allow users to withdraw 55% of their cryptocurrency assets and 66% of their cash deposits. But the exchange revealed for the first time that a third of users’ cash balances had been frozen amid separate legal disputes and ongoing investigations by law enforcement.

Khan added that users were not informed that their cash balances were frozen by a third-party organization, claiming that this was another violation requiring compensation and penalties.

Khan expects more victims to join by the time the case is filed.

WazirX under fire

WazirX, one of India’s largest cryptocurrency exchanges, has faced serious scrutiny and legal challenges in recent years.

The report stated that besides the upcoming case, two more cases have been filed against the exchange in the Delhi High Court. CoinSwitch co-founder Ashish Singhal accused the exchange of security vulnerabilities on August 28. Another investor, Jaivir Bains, submitted a petition to investigate the hacking incident on October 18.

WazirX applied for a moratorium in September as part of a restructuring process in Singapore, where its current owner is based. The company won the moratorium and now has four months immunity from any legal action against it.

Additionally, a separate group of 11 users plan to take legal action once the moratorium expires.

India’s Financial Intelligence Unit, an agency tasked with analyzing and disseminating financial information related to money laundering and terrorist financing activities, is reportedly investigating WazirX.

The exchange shared server logs, transaction records and blockchain addresses related to the stolen funds with authorities.

The exchange announced on October 25 that it was looking for a new custodial partner that could provide insurance for user funds in order to increase platform security.

WazirX was founded by former CEO Nischal Shetty and CTO Sameer Mhatre.