In a recent legal clash between CoinSwitch and WazirX, their parent companies, Bitcipher and NGD, filed a crucial affidavit, which cleverly clarified their financial position as ‘secured creditors’ and stated that their funds belong to Zanmai India, not Zettai Pvt. Ltd.
To get an edge in this legal battle, Bitcipher and NGD referred a Broker Agreement with Zanmai India, in which CoinSwitch has managed to differentiate itself from the general pool of “unsecured creditors”, clarifying itself as a secured creditor with respect to its claim of ₹73 crores.
Like previously, The affidavit also highlighted the misclassification of Bitcipher and NGD as unsecured, contingent creditors. Bitcipher and NGD argue that their contractual relationships are solely with Zanmai India, not Zettai SG, and that they should be classified as secured creditors.
According to Clause 5(b) of the agreement, Zanmai India was appointed to “hold crypto assets in brokerage accounts… in reasonably safe and secure custody of the Platform” on behalf of Bitcipher and NGD.
The key takeaway from this clause is that the crypto assets and Indian Rupees held by Zanmai India for Bitcipher and NGD are held in a fiduciary capacity, specifically segregated from the general pool of funds.
Clause 6 of the Broker Agreement further solidifies this position by stating that “the Indian Rupee balance and crypto assets stored and/or held by [Zanmai India]… are not and shall not be considered to be assets owned by [Zanmai India].”
Clause 6 makes it clear that no transfer of title in the Indian Rupees balance and crypto assets has occurred to Zanmai India, and that these assets are held solely for the benefit of Bitcipher and NGD.
Moreover, the agreement also stated that “[Zanmai India] shall not… identify, grant or accept any third-party interest, claims or rights over such Indian Rupee balance and crypto assets.” This provision leaves no room for doubt regarding the ownership and security of these funds. This statement directly interprets that the agreement classifies Bitcipher and NGD as secured creditors, with a direct claim to the INR 73 crore held by Zanmai India on their behalf.
On 19 September 2024, Zettai SG attempted to counter this position by stating that Bitcipher and NGD were contingent, unsecured creditors of Zettai SG.
CoinSwitch argues that their claim belongs to Zanmai India, which was registered under the Indian Financial Intelligence Unit (FIU) in 2023 and recognized by India’s Enforcement Directorate as the owning platform. Some users on Twitter have also raised questions that WazirX has breached Indian laws and regulations under FIU, putting serious charges against WazirX.
By establishing a direct, secured relationship with Zanmai India, CoinSwitch has effectively insulated itself from the broader disputes related to the WazirX hack.
While WazirX was promoted as the leading Indian crypto exchange, it is quite strange that the legal matter is being handled by the Singapore High Court, which has granted a moratorium to WazirX today.
Furthermore, Bitcipher and NGD have requested that the court dismiss the application for the moratorium on the grounds of “procedural non-compliance and misclassification of creditors”. Alternatively, they seek a declaration that the moratorium does not affect their claims of ₹73 crores against Zanmai India.
Bitcipher and NGD claim that Zettai SG has failed to meet “at least two mandatory provisions” under Section 64 of the Insolvency, Restructuring, and Dissolution Act 2018 (IRDA). This includes the failure to provide a complete list of the 20 largest unsecured creditors, which is a crucial procedural requirement.
However, this affidavit has disappointed WazirX victims, saying that CoinSwitch is more focused on their ₹73 crores than actually standing up for the victims.
