WazirX's fund recovery strategy faces criticism after $230 million security breach

Image: Shutterstock

WazirX, one of India’s prominent cryptocurrency exchanges, is facing backlash from customers and crypto influencers after announcing its fund recovery plans following a $230 million hack. The exchange declared that it had lost 45 percent of its holding assets in the security breach on July 18 when one of its multi-signature wallets was compromised. The platform opened polls to seek social votes to decide on further action plans for recovery. 

In a recent post, WazirX mentioned a 55/45 approach, where it would allow users to access and trade 55 percent of their portfolio tokens while converting the remaining 45 percent into stablecoins. This strategy has been severely criticised as many customers felt that it unfairly shifts the burden of the loss onto them. It could also decline the value of the overall crypto portfolio. 

Reportedly, Deepak Shenoy, CEO of Capital Mind, stated that the exchange should absorb the losses before asking users to share the burden. He also mentioned that the 55/45 approach is unacceptable and called for alternative recovery methods to prioritise user interest. Customers have also expressed their frustration on social media, questioning the trust and reliability of WazirX and urging users to be cautious. 

The two action plans include – Legal proceedings and Socialise loss and rebuild. WazirX founder Nischal Shetty defended the recovery plan by stating that the second approach offers a fast, fair, and transparent solution. He also added that the socialised loss strategy provides immediate access to a portion of assets while exploring other options, like airdrops, new tokens, and ideas, to support recovery efforts. WazirX has given the customers until August 3 to vote on these proposed recovery options. 

WazirX operations are expected to resume shortly after the poll ends. It is crucial to note that the poll is not lawfully binding, and the final decision will consider the poll results, the ongoing investigation into the hack, platform liquidity, and other evolving market circumstances. 

WazirX was established in 2018 and has emerged as India’s largest cryptocurrency exchange platform. It supports features like spot trading, staking, and peer-to-peer transactions. It offers a native utility token, WRX, integrated with Binance, a leading global cryptocurrency exchange.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist.
Twitter: @bhardwajshash