Almost two months after WazirX crypto exchange suffered a Rs 2000 crore hack, its co-founder Nischal Shetty has offered a “my way or highway” plan to its millions of users in India, leaving them in the lurch. The users now have to choose between supporting the “restructuring scheme” of WazirX and accept equitable losses or wait for the legal dispute between Binance and the exchange to get over.
As per the latest supplementary affidavit filed by Zettai Pte Ltd- the parent entity of WazirX, in Singapore High Court, the exchange users need to support the moratorium application filed by Shetty, after which the court will approve the restructuring scheme. The moratorium application filed by Shetty will protect Zettai and WazirX exchange from any legal action for the next six months, in order for them to come up with a restructuring scheme.
According to Shetty, till now 441 users have shown them support out of 4.4 million active users of WazirX, which makes them 0.01%. WazirX vis-a-vis Zettai is currently in a legal dispute with Binance over the management of crypto assets of platform users.
“If a moratorium is not granted, the prospect of a successful restructuring would be greatly reduced. The Platform’s users would likely have to wait for the dispute with Binance to be resolved, as until then, Zettai would not be able to return the cryptocurrency tokens which it holds only under protest. In such a scenario, it would be only after the dispute with Binance is resolved that the Platform’s users might have some clarity over who owns the Platform and its cryptocurrency tokens. It is not clear how long this process would take,” said Nischal Shetty in the affidavit.
As the moratorium application was filed on August 27, 2024, and the hearing is still pending, the WazirX team explained its restructuring process and why they need the creditors’ support to pass this application in the Singapore High Court.
However, it is pertinent to note that there is no timeline guarantee of the implementation of restructuring scheme. Moreover, the legal advisors of WazirX had commented recently that users might have to face 43% equitable loss after the implementation of the scheme.
Highlights of WazirX Singapore Restructuring Scheme
The restructuring process begins with Zettai filing a moratorium application, which is already filed on August 27, 2024, requesting the Court to grant permission for a temporary halt on debt enforcement actions.
The next crucial stage will be the creditors’ meeting, after 21 days of court’s approval of application, where they will vote on whether to approve the proposed Scheme. To pass the moratorium application, the Scheme requires approval by more than 50% of creditors and 75% or more of the total debt value of each class of creditors.
If the Scheme meets these conditions and is approved, Zettai will apply to the Court for final sanction within 30 days. The Court is then expected to hold a hearing to review the application and approve the Scheme within 21 days.
The approval would buy Zettai time to propose a restructuring plan ‘scheme’, without operating under the pressure of creditor. During this period, Zettai sends out notices to all its creditors, providing detailed information about the Scheme, including potential recovery estimates for each creditor group. Once approved, the Scheme is immediately implemented, allowing Zettai to restructure its debts and move forward with its recovery plan.
On the flip side, If the creditors do not approve the Scheme, Zettai will reassess its options., which is not good for creditors at all. The second option includes revising the Scheme for another vote or reverting to the original path. This could involve resuming its dispute resolution process with Binance, which may take an indefinite period of time and may leave users in the lurch.
Conclusion
This affidavit, quite plainly, offers two choices for fund recovery: happily support the restructuring process, or, if they can prefer, embark on a long, and painfully tedious journey of watching the legal dispute with Binance get settled.
Also Read: WazirX is going to court with support of 0.01% users
