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Crypto exchange WazirX has faced significant criticism for its proposed “55/45” plan to socialize losses from a recent attack on the platform.
On July 27, WazirX initiated a poll to gauge public sentiment for a recovery plan after a hack resulted in the loss of millions of dollars in crypto. The plan aimed to distribute the losses, amounting to $230 million, among all users.
However, due to customer backlash, the crypto trading platform decided to abandon the plan. According to the exchange’s blog, the proposal intended to limit users to spending 55% of their assets on the platform while converting the remaining 45% into stablecoin reserves.
WazirX Co-founder on the Cyber Attack
Following community backlash, WazirX co-founder Nischal Shetty clarified that the poll was not legally binding and was meant to collect community feedback. Despite this, the exchange’s user base remains dissatisfied.
This poll is a preliminary step to understand your opinions. It is not legally binding upon the users or WazirX. We will soon launch a feedback form to collect more ideas. We are now looking into next steps based on all the feedback received.
Shetty added, “This is a major cyberattack and we need more time to work on resolution. Your support and feedback will help us navigate this effectively. We are committed to transparency and will continue to update you as we refine our approach based on your suggestions.”
User Concerns and Criticisms
Some users have raised concerns about how the exchange plans to reimburse the victims of the hack. They are questioning the exact reserves left and the delay in starting withdrawals.
How long will it take you to just tell your users your exact reserves left? Which token and how much was stolen? And why are you not starting withdrawals? Buying time every time is not fair. It doesn’t take this much time.
Others have complained that the exchange is selectively answering questions and avoiding the most critical issues.
Crypto Security Firms Weigh In
Crypto security firms and analysts have provided insights into how the hack possibly occurred. Notably, analyst @BoringSleuth from TruthLabs raised concerns about WazirX’s operations days before the exploit.
TruthLabs issued a warning about a security vulnerability affecting multiple layer 2 blockchains, including Blast, Optimism, Mantle, and Coinbase’s Base. According to TruthLabs, these platforms use similar multi-signature contracts to WazirX, potentially jeopardizing billions of dollars in user funds.
A thread showing WazirX’s own misleading actions and security lapses which most likely led to their customers losing over $230M in assets.
The analysis highlighted that WazirX’s deployer address had only transferred funds to three destinations: a Binance wallet, a burn address, and a SwipeX contract — all allegedly linked to laundering stolen funds.
The Indian cryptocurrency exchange denies all accusations of security lapses by TruthLabs, insisting that it has consistently employed multiple key holders.
Binance’s Involvement
The security analyst suggested that WazirX’s main exchange address, established in 2022, originated from a Binance address previously connected to fraud and theft. This implies that WazirX and Binance might not have fully severed their ties as previously claimed.
In 2019, Binance announced that it had acquired India’s leading digital asset platform WazirX. However, it later clarified 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 has a systemic impact on the crypto space,” the company stated in 2023.
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