CoinSwitch, a major cryptocurrency exchange in India, has decided to take legal action against WazirX. They’re trying to recover funds that are currently stuck due to a cyber attack that stole $230 million in digital assets.
This lawsuit comes after WazirX reported a significant security breach over a month ago. They proposed a controversial idea called a “socialized loss” strategy. This means they plan to spread the financial hit across all their users.
CoinSwitch claims they have about ₹810 million, or $9.65 million, trapped on WazirX’s platform. This amount includes ₹124 million in cash, ₹287 million in ERC20 tokens, and ₹399 million in other cryptocurrencies.
In a recent post on X, CoinSwitch expressed their frustration. They said, “We’ve tried to stay in touch with WazirX since the incident, but we haven’t found a way to recover the funds stuck on their platform.” They noted that the trapped funds make up about 2% of their total assets. Fortunately, less than 1% of their overall assets were affected by this cyber attack, which mainly impacted ERC20 tokens.
CoinSwitch is backed by well-known investors like a16z, Coinbase, and Peak XV. To keep things stable for their users, they are using their own treasury to ensure a 1:1 ratio for user holdings on their platform. They also mentioned that their total assets are 1.51 times greater than the user assets invested through their services.
Additionally, CoinSwitch keeps about 7% of its liquidity on third-party exchanges. This helps ensure smooth trading for their users.
This lawsuit highlights the ongoing struggles in India’s cryptocurrency market. The industry is facing regulatory issues and security threats. The WazirX incident, now recognized as the largest crypto heist in India, has further shaken trust in the sector.
Last month, WazirX said they planned to resume operations within a week after the attack. However, they only intend to return 55% of customer holdings. The remaining 45% will be locked in USDT-equivalent tokens.
Nischal Shetty, the founder of WazirX, confirmed that the company does not insure customer funds. He cited a lack of viable options. He also warned that recovery efforts could take years and that success isn’t guaranteed. Shetty has not yet responded to requests for comments.