WazirX Hack: Users Furious Over Proposed Recovery Plan Amid $230 Million Crypto Heist
Days after a major security breach led to the theft of over $230 million in cryptocurrency assets from WazirX, the platform's users are still unable to access their funds. The crypto trading platform is now considering various options to resume operations.
The breach prompted WazirX to halt both rupee and crypto withdrawals and pause trading. This was due to a significant portion of the platform's reserves being siphoned off from a Multi-Signature (MultiSig) wallet managed by third-party custody service provider Liminal. This incident has severely impacted WazirX's ability to maintain a 1:1 collateral with its assets.
Efforts to Recover Stolen Assets
WazirX is actively collaborating with forensic experts and law enforcement agencies to track and recover the stolen assets. The platform has also announced rewards for information leading to the recovery of the funds and has alerted other crypto exchanges to block the addresses involved in the theft.
Proposed Recovery Plan and User Backlash
WazirX co-founder Nischal Shetty has indicated that recovering the stolen assets could be a lengthy process. To reopen the platform quickly, the company proposed a plan to rebalance crypto portfolios and distribute the losses among users, with each user bearing a 45 percent loss on their holdings.
This approach, known as the 55/45 plan, has sparked outrage among users who feel betrayed. "Who is at fault? WazirX. But who is paying for it? Users," Paras Babbar, a Web3 professional and long-time crypto investor, told the Indian Express.
Details of the 55/45 Plan
According to the proposed plan, users will be able to trade or withdraw only 55 percent of their crypto assets. The remaining 45 percent will be converted into USDT-equivalent tokens and locked. Users are given two options:
Option A: Trade their unlocked 55 percent of crypto assets but with no ability to withdraw.
Option B: Trade and withdraw their assets but lose priority in the recovery of stolen funds.
User Reactions
Many users are dissatisfied with this plan. Sana Afreen, whose crypto assets worth Rs 25 lakh are stuck on the platform, criticized the plan for unfairly imposing liabilities on users. "It’s not fair. Why are you socializing the losses among customers rather than between the customers and the company?” she questioned.
Another user, speaking anonymously, expressed distrust in the company’s intentions, "I find both poll options challenging to evaluate, as I’m uncertain how the company might use the funds to their advantage."
Poll and Future Steps
The poll for users to choose between the two options closes at 7 am on August 3. WazirX clarified that this poll is a preliminary step and its outcome will not be final. The company is also exploring other recovery options, such as airdrops.
Criticism and Transparency
WazirX justified the socialization of losses by stating it balances quick access for some with potential recovery for others. However, users are not convinced, especially since the breach affected the exchange’s liquidity rather than specific user funds.
Despite the criticism, some users appreciated WazirX's transparency and active communication since the hack. Afreen suggested a more acceptable loss percentage of 15 or 20 percent instead of 45.
The incident has significantly impacted users' trust in WazirX. Moving forward, many users, including Afreen, plan to be more cautious and opt for platforms with stronger regulations to better protect their investments.
