Victims Prepare Class-Action Lawsuit Against WazirX Following $235 Million Hack

A group of victims is gearing up to file a class-action lawsuit against the crypto exchange WazirX in response to a significant hack that resulted in the loss of approximately $235 million. The incident, which occurred on July 18, saw around 45% of user funds drained from the platform’s hot wallet.

According to local media reports, thirty victims impacted by the breach plan to submit their lawsuit to the National Consumer Disputes Redressal Commission in India. The plaintiffs aim to recover crypto assets valued at over INR 5 crores (around $600,000), asserting that WazirX acted beyond its legal boundaries.

The hack affected nearly 4 million users and prompted WazirX to seek a Scheme of Arrangement in Singapore, a restructuring process under local insolvency laws. The exchange successfully obtained a four-month moratorium, temporarily halting any legal claims against it.

Legal Claims and Representation

The upcoming lawsuit will center on the argument that WazirX's agreement with its users is through its Indian entity, Zanmai Labs Pvt. Ltd. Supreme Court lawyer Aman Rehaan Khan is representing the victims and contends that the decision to file for asset restructuring in Singapore via its parent company, Zettai Pte Ltd, lacks legal justification.

Zettai was never a party to the user agreement,” Khan stated.

Zettai, based in Singapore, oversees the exchange’s cryptocurrency assets, while Zanmai Labs manages cash deposits for Indian users. Initially, Zanmai operated WazirX in India but is now fully owned by Zettai, following an ownership dispute with Binance.

Lack of Transparency Regarding Frozen Funds

Nearly a month after the hack, WazirX announced it would permit users to withdraw 55% of their cryptocurrency holdings and 66% of their cash deposits. However, it was during this announcement that the exchange disclosed for the first time that one-third of users' cash balances had been frozen due to separate legal disputes and ongoing investigations by law enforcement.

Khan emphasized that users were not informed about the freezing of cash balances by a third-party entity, claiming this lack of communication constitutes another violation warranting compensation and penalties. He anticipates that more victims will join the lawsuit as it approaches.

Ongoing Scrutiny of WazirX

WazirX, one of India's largest cryptocurrency exchanges, is facing mounting scrutiny and legal challenges. In addition to the impending lawsuit, two other cases have been filed against the exchange in the Delhi High Court. On August 28, CoinSwitch co-founder Ashish Singhal accused WazirX of security lapses, while investor Jaivir Bains filed a petition on October 18, calling for an investigation into the hack.

The exchange filed for a moratorium in September as part of its restructuring process in Singapore, and it won four months of immunity from legal proceedings. A separate group of eleven users also plans to pursue legal action once the moratorium expires.

India’s Financial Intelligence Unit, which analyzes financial information related to money laundering and terrorist financing, is reportedly investigating WazirX. The exchange has shared server logs, transaction records, and blockchain addresses related to stolen funds with authorities.

On October 25, WazirX announced it is seeking a new custodian partner that can provide insurance for user funds, aiming to enhance platform security.

WazirX was co-founded by former CEO Nischal Shetty and CTO Sameer Mhatre.