CoinSwitch To File Lawsuit Against WazirX To Recover Stuck Funds

Days after WazirX experienced $230 Mn crypto heist, cryptocurrency platform CoinSwitch said that it will be initiating a legal action against the crypto exchange to recover 2% of its trapped funds.

CoinSwitch said in a blogpost on Wednesday (August 28) that it cumulatively held INR 12.4 Cr and INR 28.7 Cr in ERC20 tokens, and INR 39.9 Cr in other tokens on WazirX.

“This amounts to about 2% of all funds of CoinSwitch. According to the WazirX claim, only ERC20 tokens were impacted in the alleged cyber attack. That translates to less than 1% of total CoinSwitch funds,” the blog post added.

WazirX experienced a major security breach on July 18, resulting in withdrawals of approximately $234.9 Mn during the early European hours.

The security breach impacted one of its wallets Safe Multisig on the Ethereum network, resulting in the loss of user funds.

CoinSwitch further said that WazirX failed to respond to its queries regarding the recovery of the funds that prompted them to pursue legal action.

“We have attempted to be in regular touch with WazirX since the day of the incident but have not been able to reach a solution to recover the funds that are stuck on their platform,” the blog post further said.

Inc42 has reached out to WazirX for comments on the development. The story will be updated based on the response.

It is pertinent to note that the development came on the same day (August 28) when WazirX claimed to have filed an application with a Singapore court seeking moratorium to provide necessary “breathing space” while company’s parent entity, Zettai facilitates restructuring of liabilities under a scheme of arrangement.

The company filed the application days after revoking the suspension on withdrawals and allowing INR balance withdrawals in a staggered manner. 

However, the company also said that users could only access 66% of the funds in their wallet due to some funds being frozen amid Zettai’s ongoing disputes and investigations by law enforcement agencies.  

Earlier this month, WazirX also terminated its arrangement with wallet infrastructure provider Liminal in the process of migrating its remaining assets to new multisig wallets. 

As per its X post, the exchange platform attributed the move to the need to ensure maximum security of its crypto assets in “light of recent events”, hinting at the crypto hack.

Few days after the cyber attack, WazirX also pitched a socialised loss strategy that proposed making customers absorb 45% of the losses caused by the hack. However, the plan was put off later following backlash from users.