WazirX looks for white knight; users set to lose 43% funds

Crypto exchange WazirX has said customers affected by the recent cyber attack will not be able to recover their full funds even as the firm looks to restructure.

At a virtual press conference, the firm’s advisor said at best the company might look to return 55-57 per cent of the money.

“This is what can be returned to users with the benefit of this restructuring,” said Jason Kardachi, managing director (restructuring), Kroll.

The Indian crypto currency platform also said it was restructuring and as part of that it was looking for a white knight to provide capital and pursue partnership and collaboration.

This would entail implementing revenue-generating products and mechanisms to share profit with users, tracing and recovering stolen crypto assets, and/or allowing users who need liquidity urgently to withdraw crypto assets more quickly and exit restructuring.

This allows users willing to stay in restructuring to receive higher recoveries, said the company.

WazirX, whose parent company, Zettai, is based in Singapore, has applied for restructuring at a Singapore court on August 23.

On Tuesday, the court will take into account creditors’ views in deciding whether to grant a moratorium.

On July 18, the day the cyber attack occurred, crypto assets worth $240 million (about Rs 2,000 crore) were stolen. This is one of the largest crypto thefts in India so far.

With customers pushing the company to return their funds, the company said a moratorium was needed to give Zettai the time to work with contingent unsecured creditors to develop a restructuring proposal that could be voted on and approved by creditors.

Nischal Shetty, co-founder of WazirX, said the funds raised would not be against equity because the company had a dispute with Binance.

“Our position still is that WazirX was sold to Binance and that dispute is still on.

"If both sides take that position then it would mean a longer delay for the users because they will have to wait for the conclusion of the dispute,” said Shetty on the call.

However, neither Shetty or Kroll’s representative gave details about the dispute or where the proceedings had reached.

Meanwhile, WazirX has allowed funds in rupees to be withdrawn though crypto assets are still frozen.

WazirX has 4.3 million active customers, based largely in India.

Rupee deposits and associated activities are operated by India-incorporated Zanmai Labs, and crypto deposits and associated activities were operated by Binance until January last year, when Binance announced its intention to cease providing services to WazirX.

Under protest, Singapore-incorporated Zettai took partial control of crypto tokens from Binance to ensure that WazirX users were not affected, and while Zettai handles crypto assets of the platform under protest.

Zettai’s position is that Binance had no basis for the termination and it (Binance) continues to operate the platform.