WazirX Faces Backlash Over Socialized Losses from $230M Cyberattack
The Indian cryptocurrency exchange WazirX has announced a plan to “socialize” $230 million in losses from a recent cyberattack. This decision has sparked outrage within the local cryptocurrency community.
Following the theft of nearly half of the exchange’s reserves in the largest cryptocurrency heist in India, WazirX suspended all trading operations. The company has now introduced a strategy to resume operations within a week, proposing a “fair and transparent social distribution strategy” to evenly distribute the losses among all users.
According to the new plan, WazirX will “rebalance” clients’ portfolios, returning only 55% of their assets, while the remaining 45% will be locked in tokens equivalent to USDT. These measures will affect even those clients whose tokens were not directly impacted by the breach, with these users also receiving back 55% of their assets.
Users are offered two options for further actions:
- The platform allows trading and storing crypto assets with a priority on recovery but restricts withdrawals;
- The platform permits trading and withdrawals, but users will have a lower priority in the recovery process.
The second option allows users to trade and withdraw their assets, but recovery efforts will focus on those who chose the first option. Users can switch between options at any time before making any trades or withdrawals.
WazirX confirmed that the company did not insure clients’ funds, as it is not feasible. A representative warned that recovery efforts might not succeed and could take years.
Experts note that WazirX effectively controls the stored crypto assets of its users, meaning the exchange does not merely act as an exchanger and custodian but extracts cryptocurrency from users’ wallets and transfers it to others. WazirX cannot claim to be just an exchange. Many WazirX users also questioned why the company does not use its profit reserves to compensate clients or at least mitigate the damage.
The cyberattack on WazirX resulted in the theft of over 200 different cryptocurrencies. The attack targeted one of the company’s multi-signature wallets, which requires multiple keys to authorize transactions.
