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WazirX Under Scrutiny: Uncovering the Truth Behind the July Hack
India’s largest cryptocurrency exchange, WazirX, is under intense scrutiny following a devastating hack in July 2024. The hack resulted in the loss of around $235 million (₹2,000 crore) from a single wallet. Initially, the exchange attributed the breach to external forces, but new allegations suggest that the hack might have been an inside job. In this article, we will delve into the facts and examine the circumstances surrounding the breach.
The Dominoes Leading to the Hack
The troubles for WazirX began in February 2022 when the Indian government imposed a 30% tax on cryptocurrency profits. This policy led to a collapse in overnight revenue for the exchange, resulting in reduced user activity and shrinking profits. Two months later, WazirX’s founders, Nischal Shetty and Siddharth Menon, permanently relocated to Dubai, sparking uncomfortable questions about their intentions.
In August 2022, India’s Enforcement Directorate froze $8 million worth of WazirX’s assets, alleging involvement in money laundering. Although WazirX denied these allegations, the raid tarnished the exchange’s reputation and added immense operational strain. The challenges deepened in January 2023 when Binance, the global cryptocurrency giant and WazirX’s former partner, cut all ties with the exchange.
A Web of Allegations and Discrepancies
The fallout from the WazirX hack has grown messier with each passing day, with new allegations and financial discrepancies emerging. A vocal group of WazirX users has alleged that the hack might have been an inside job, citing a detailed timeline of events leading up to the breach. The group argues that the circumstances surrounding the breach are too coincidental to ignore.
WazirX’s affidavit and financial statements have exposed critical issues related to the platform’s operations and transparency. The exchange’s moratorium application in Singapore aimed to restructure its obligations after the hack, but the application was met with skepticism. Out of 4.2 million users, only 431 expressed support for the moratorium, representing just 0.01% of the total user base.
WazirX’s Plan to Refund Users
Amid growing pressure and unresolved questions following the July hack, WazirX has introduced a structured plan to compensate its creditors. The plan promises eventual repayment, but it comes with conditions that require users to absorb an immediate loss. Central to this effort is the launch of a “rebalancing calculator,” which calculates the exact amount owed to each creditor. However, users are facing a 48% haircut on their funds, which WazirX claims will be addressed gradually over time.
Arrests, Allegations, and Unanswered Questions
In October, the Delhi High Court heard a petition filed by investor Jaivir Bains, alleging that WazirX merged funds from hacked and unhacked accounts to mitigate losses. The petitioner’s counsel argued that these actions violated the exchange’s user agreement and regulatory standards, urging an investigation by the Financial Intelligence Unit (FIU) and the Enforcement Directorate (ED).
The Delhi Police’s Special Cell recently arrested SK Masud Alam, a resident of West Bengal, in connection with the cyberattack. According to the chargesheet, Alam allegedly created a fake account under the alias “Souvik Mondal” and sold it on Telegram to another individual, M. Hasan, who reportedly used it to breach WazirX’s systems.
A System Failing Its People
The WazirX hack case remains shrouded in ambiguity, with the truth yet to emerge. Whether it was a sophisticated external attack or an inside job disguised as one, the incident has exposed vulnerabilities in cryptocurrency platforms and highlighted the inadequacies of India’s regulatory and legal systems in managing such crises effectively.
Since the hack in July 2024, millions of users have been left in distress, with many facing financial ruin. Social media is filled with heart-wrenching stories of investors grappling with the loss of their life savings. Reports have surfaced of victims resorting to extreme measures, including falling into severe debt to cover their losses, selling personal assets, and, in tragic cases, even contemplating suicide.
Nearly five months after the hack, India’s regulatory and enforcement bodies have been slow to act. The FIU and the ED, tasked with financial compliance and investigating money laundering, have largely stayed on the sidelines. Meanwhile, the focus of the case has shifted overseas, with WazirX’s restructuring program under review by the Singapore High Court.
“The distress of the users serves as a sobering reminder of the consequences of systemic failures.”
As the WazirX case continues to unfold, one thing is clear: the need for greater transparency, accountability, and regulatory oversight in the cryptocurrency industry. For now, the users of WazirX can only wait and hope that the truth will emerge, and justice will be served.
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