Zettai Pte Ltd, the parent company of WazirX, made a significant move by applying to the Singapore High Court for a moratorium under Section 64 of the Insolvency, Restructuring, and Dissolution Act 2018. This decision follows a major cyber attack on WazirX on July 18, 2024, resulting in the theft of approximately $230 million (₹2000 crore) worth of cryptocurrency assets.
Understanding the Moratorium and Its Implications for WazirX
In simple terms, a moratorium temporarily suspends an activity or law until further consideration deems it necessary to lift the suspension. For WazirX, this strategic move aims to buy more time to restructure the company's liabilities through a scheme of arrangement. The filing initiates a 30-day moratorium, during which the Singapore court will evaluate the request and determine its duration.
Just before the legal action, the cyber attack primarily targeted ethereum-based ERC-20 tokens stored in WazirX's hot wallets. In response, the platform suspended all withdrawals, leading to frustration among users concerned about accessing their funds. The moratorium sought by Zettai Pte Ltd plays a crucial role in WazirX's recovery strategy, providing essential breathing space for restructuring efforts and shielding the company from creditor enforcement actions.
As stated in WazirX's official communication, the restructuring aims to allocate the impact of the cyber attack pro-rata among users who are considered unsecured creditors. This means affected users would receive a portion of available token assets proportional to their share of unsecured claims for account balances.
? Moratorium Application Filed in Singapore Court
We wish to update all users of the WazirX Platform that we have taken the next step to address users' crypto balances following the 18 July 2024 cyberattack by filing for a moratorium with the Singapore High Court under the…
— WazirX: India Ka bitcoin Exchange (@WazirXIndia) August 28, 2024
Challenges with the Restructuring Plan and User Discontent
The proposed restructuring plan poses significant implications for WazirX's user base, where users are classified as unsecured creditors with claims for the value of their token balances. Despite the legal basis for these claims, customers strongly opposed the initial proposal to redistribute losses among all wallets on the platform, including unaffected ones.
Rival exchange CoinSwitch has also filed a lawsuit against WazirX over trapped funds on the platform after the cyber attack. CoinSwitch claims to have approximately $9.7 million (Rs 81 crore) in assets on WazirX, which has led to ongoing challenges in recovering the funds.
How much funds were on WazirX?
Cumulatively we have Rs 12.4 cr in INR, Rs 28.7 cr in ERC20 tokens, and Rs 39.9 cr in other tokens on WazirX. This amounts to about 2% of all funds of CoinSwitch.
— CoinSwitch: India's Simplest crypto App ? (@CoinSwitch) August 28, 2024
With ongoing disputes and challenges in retrieving the funds from WazirX, both platforms are facing intense scrutiny and increasing pressure for transparent communication. Plans for a town hall meeting and ongoing discussions with binance add further complexity to the situation and may impact the restructuring process.
