More than a month after WazirX crypto exchange was hit by a hacking incident that resulted in loss of 45% user funds and subsequent suspension of all withdrawals from the platform, the exchange owners finally announced a recovery plan to users on Friday.
However, WazirX customers have little to gain and much to lose in the newly announced proposal under which there is no guarantee timeline on recovery of 100% crypto funds and only 66% INR funds to be made available for withdrawals in two separate phases for every customer.
For now, WazirX has offered a 20 cents (Rs 15) discount to all users on the fee they levied on INR withdrawals by them. The exchange has also claimed that they have frozen the remaining 34% INR funds of all users, which they promised to return in near future, once an ongoing investigation by law enforcement agencies conclude.
What is WazirX Withdrawal Plan?
To explain it in simple terms, WazirX will allow users to withdraw only 66% INR funds in two separate phases and there is no plan in near future regarding withdrawal of 100% crypto funds. On July 18, a breach was detected in one of the multi-signature digital wallets of WazirX that resulted in several malicious transactions of cryptocurrencies total amounting to Rs 2000 crore ($230 Million). According to WazirX, there was no harm done to the INR funds of customers.
However, the rationale WazirX has put behind freezing 34% INR funds of all users is that various law enforcement agencies are currently investigating “suspicious activities” by third parties on Zanmai, the parent company of WazirX. The exchange claims that once the investigation is over, the 34% INR funds will be unlocked and returned to users. There is no guarantee on that timeline. WazirX has also clarified that Zanmai is not under any investigation by the authorities.
It is also pertinent to note that India’s Enforcement Directorate (ED) agency had once freezed assets of WazirX in an investigation related to money laundering back in 2o22. The ED had observed that the exchange owners particulary Nischal Shetty had made attempts to obscure the ownership of the exchange.
Moreover, the exchange has promised that they will approach the Singapore Scheme of Arrangement proposal under the Insolvency, Restructuring and Dissolution Act (2018, “IRDA”) of the Singapore regulatory framework to find a solution for 100% recovery of crypto funds.”Through a Scheme, a company can put forward a proposal to its creditors to restructure its debts and deliver stronger recoveries to creditors than under a liquidation subject to creditor approval and Court sanction.
“A creditor-approved and Court-sanctioned Scheme will be legally binding on both the company and its creditors, and the IRDA sets out clear timelines, requirements and Court processes to ensure that creditors have enough information to make an informed decision on the proposed terms,” read the statement from WazirX.
WazirX to Approach Singapore High Court to further delay withdrawals?
Additionally, the WazirX crypto exchange and its parent company Zanmai Private Labs Limited will be approaching the Singapore High Court to seek “more breathing time” for the exchange to ensure smooth retrieval of customer funds.
As reported earlier by The Crypto Times, the user agreement policy of WazirX has a 60 day buffer period in any case of dispute between users and Zanmai regarding their funds. Post the buffer period, customers can approach authorities in Singapore to retrieve their funds, as per the policy.
The fact that WazirX will be approaching the judiciary in Singapore to seek more time means that users might have to wait for several months before they could see 100% return of their funds (both crypto and INR).
Also Read : WazirX says no crypto withdrawals, only 66% INR for users
Conclusion
The recent announcement by WazirX is full of obscurities with very little focus on bringing clarity and concrete steps for retrieval of user funds. The agony of WazirX customers continue.
