‘We’re looking into next steps’

Cryptocurrency exchange WazirX has come under intense criticism for its proposed “55/45” scheme to socialize losses incurred in the recent hack of the platform.

On July 27, WazirX launched a survey to gauge public opinion on its plan to get the exchange back up and running after the hack that led to millions of dollars in cryptocurrency losses. The plan aimed to distribute the losses, which amounted to $230 million, to each user.

However, due to backlash from its customers, the cryptocurrency trading platform has reportedly decided to abandon this plan.

According to the information on the exchange’s blog, the proposal was to limit users to spending 55% of their assets on the platform, while the remaining 45% would be converted into stablecoin reserves.

WazirX co-founder: ‘This is a major cyberattack’

Following backlash from the community, WazirX co-founder Nischal Shetty hastily clarified that the survey was not legally binding. He said it was conducted to gather feedback from the community, a statement that did not seem to have calmed the anger of the exchange’s user base.

1. This survey is a preliminary step to learn your opinions.
2. This survey is not legally binding on users or WazirX.
3. We will soon launch the feedback form to collect more ideas
4. We are now reviewing the next steps based on all feedback received

This is an important… https://t.co/tcdDjWzIYI

— Nischal (Shardeum) 🔼 (@NischalShetty) July 29, 2024

“This is a major cyberattack and we need more time to work on a solution. Your support and feedback will help us manage this process effectively,” Shetty added. “We are committed to transparency and will keep you informed as we refine our approach based on your suggestions.”

Some users of the platform have expressed concerns about how the exchange is handling compensating victims of the recent attack, as shown in the X post below.

#wazirx
How long will it take to tell your users exactly how much you have in reserve? How much of each token was stolen? And why aren’t you initiating withdrawals? It’s not fair to have to buy every time. It doesn’t take time.#wazirxhack pic.twitter.com/XEdr2vCJS7

— सच्च तक (@TakaSacca19744) August 3, 2024

Others complained that the exchange was selectively answering questions and skipping over the most important issues.

Crypto security firms and investigators have come forward with explanations of how the attack happened, including X analyst @BoringSleuth, popularly known as TruthLabs. TruthLabs had raised several concerns about WazirX’s operations days before the attack.

They had issued a warning about a vulnerability affecting multiple layer 2 blockchains, including Blast, Optimism, Mantle, and Coinbase’s Base.

According to TruthLabs, the platforms use multi-signature contracts similar to WazirX, which may have put billions of dollars worth of user funds at risk.

Their analysis revealed that WazirX’s distribution address only transferred funds to three destinations: a Binance wallet, a burn address, and a SwipeX contract, all of which are allegedly linked to laundering stolen funds.

The Indian cryptocurrency exchange has denied all accusations that TruthLabs had security vulnerabilities that led to the hack, instead insisting that it consistently employed multiple keyholders.

Is Binance to blame?

The security analyst also noted that there is a high probability that the main exchange address of WazirX, which was founded in 2022, originates from a Binance address that has previously been linked to scams and theft.

The detective hinted that the two companies, WazirX and Binance, may not have completely severed their ties as they previously claimed.

Binance issued a press release in 2019 stating that it had “acquired WazirX, India’s leading digital asset platform.” It later censored the statement, clarifying that it was an agreement to purchase “certain assets and intellectual property” of WazirX.

“Binance is by far the largest crypto exchange in the world. Whatever happens to it will have a systemic impact on the crypto space,” the company said in 2023.