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In a controversial move, cryptocurrency exchange WazirX announced plans to “socialise” the $230 million loss from its recent security breach among all its customers.
On July 18, the cryptocurrency exchange was hit by a cyber attack that led to the loss of over 45 per cent of its total digital assets. The attack, which it characterised as a “force majeure” event, was not only the biggest breach of a cryptocurrency firm in India but is also among the top hacks in the world.
WazirX has outlined a strategy to resume operations within a week or so while implementing a “fair and transparent socialised loss strategy” to distribute the impact “equitably” among its user base.
WazirX will “rebalance” customer portfolios on its platform, returning only 55 per cent of their holdings while locking the remaining 45 per cent in USDT-equivalent tokens. This will also impact customers whose tokens were not directly affected by the breach, with the company stating that “users with 100 per cent of their tokens in the ‘not stolen’ category will receive 55 per cent of those tokens back.”
The security breach resulted in the theft of over 200 different cryptocurrencies, with the bulk of the losses concentrated in several popular tokens including Shiba Inu (SHIB), Ethereum, Polygon’s MATIC, and the meme cryptocurrency Pepe, according to blockchain data analysis provided by third-party explorer Lookchain.
WazirX is providing users with two choices for managing their crypto assets. Option A allows users to trade and hold their assets with a higher priority for recovery efforts but limits withdrawals. Option B permits both trading and withdrawals but gives users a lower priority for recovery. Users can switch between these options under certain conditions.
WazirX stated, “Option B lets you trade and withdraw your assets, but recovery efforts will prioritise those who chose Option A first. You can switch to Option A anytime before making any trades or withdrawals.”
During a community call on Friday evening, WazirX founder Nishal Shetty explained that the firm did not insure customer funds due to the lack of viable options. He cautioned that recovery efforts might take years and may not be successful.
Many WazirX customers questioned why the firm is not using its profit reserves to compensate customers or mitigate the impact.
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