WazirX Crypto Heist: Nischal Shetty Making False Claims To Implicate Us, Says Binance

Crypto exchange Binance has alleged that WazirX cofounder Nischal Shetty is trying to “falsely implicate” Binance in the $230 Mn crypto heist at the Indian crypto platform.

In a lengthy blog post, Binance claimed that Shetty made “several inaccurate statements” in sworn affidavits before the Singapore High Court (HC) in connection with the ongoing dispute between Zettai (which holds the shares in WazirX parent Zanmai Labs) and Binance.

It is pertinent to note that the Indian crypto exchange filed a moratorium application before the Singapore HC in August to get the necessary “breathing space” to facilitate the restructuring of liabilities under a scheme of arrangement.

In the blog post, Binance said, “Despite Mr Shetty’s attempts to deflect blame and falsely implicate Binance, the facts remain clear: Binance is not a party to WazirX’s user agreement, has never owned or operated WazirX, and does not hold any WazirX user funds. We urge the user community to stay informed and critically evaluate the misleading statements made by Mr Shetty…” 

Binance also claimed that Shetty is trying to mislead WazirX customers and the market and perpetuate an inaccurate narrative. The world’s largest crypto exchange reiterated that it bears no responsibility for the operation of the WazirX platform or the “consequences of the cyberattack”.

Binance claimed that the WazirX cofounder made as many as four “false” and “misleading” statements in its two affidavits before the Singapore HC:

• Shetty asserted that Binance has acquired ownership and control over WazirX
• WazirX cofounder suggested that the outcome of the current dispute between Zettai and Binance may result in a determination that Binance owns WazirX and that this would result in the creditors of Zettai becoming creditors of Binance
• Shetty asserted that Binance is a party to WazirX user agreement
• Shetty suggested that Binance is somehow responsible for the consequences of the cyberattack because Binance requested that the WazirX user funds be removed from Binance wallets

The Ownership Dispute Takes Centrestage Again

In the post, Binance alleged that Shetty, in the two affidavits, falsely claimed that Binance acquired ownership in WazirX and controlled the Indian crypto platform. It added that Shetty is “trying to deflect the blame and claim that Binance may somehow be responsible for the losses suffered by WazirX users and creditors as a result of the cyberattack”.

Binance said that India-incorporated Zanmai Labs is the legal entity that registered the WazirX platform with the financial intelligence unit (FIU) under the finance ministry. 

Quoting Enforcement Directorate (ED), the Richard Teng-led company said that the agency named Zanmai as the owner of WazirX. “At all times, Shetty’s team retained ownership and control over WazirX,” Binance added.

For context, crypto exchanges operating in the country are required by Indian law to be registered as “reporting entities” with the FIU. 

The dispute over ownership of WazirX harks back to 2022 when Shetty and then Binance CEO Changpeng Zhao publicly sparred over the ownership of the Indian crypto exchange. While Binance publicly announced the acquisition of WazirX in 2019, it later took a U-Turn in 2022 and said that the deal never closed and Binance never owned any shares of Zanmai Labs. 

However, Shetty then said that WazirX was indeed acquired, adding that Binance owned WazirX’s domain name, root access to AWS servers, crypto assets and crypto profits. 

Meanwhile, with regards to Shetty’s supposed claims that the ownership dispute may lead to creditors of Zettai becoming creditors of Binance, the crypto giant reiterated that it would not be liable for claims against Zettai as it does not own WazirX. 

On Shetty’s contention before the HC that Binance is a party to WazirX’s user agreement, the crypto giant said that Binance only offered wallet services as a third-party tech solution to Zanmai. 

“The references to Binance on the WazirX User Agreement have never been authorised or agreed by Binance. Binance has strongly objected to the unauthorised references to Binance in the WazirX User Agreement and demanded that references to Binance be removed from the WazirX User Agreement. Yet, Shetty, Zanmai, and related entities, who control WazirX, ignored these demands,” the blog said. 

On the fourth claim, Binance said that it cannot be held “responsible” for the hacks as the directions to WazirX to withdraw funds from its wallets pertained to January 2023. 

“Shetty suggests that Binance is somehow responsible for the consequences of the cyberattack, because Binance requested that the WazirX user funds be removed from Binance wallets. This is incorrect… Binance is not obliged to hold WazirX user funds and gave fair notice that WazirX user funds should be removed from Binance’s wallets long before the attack occurred, which Mr. Shetty’s team did,” added Binance.

The row comes nearly two months after WazirX was hit by a major crypto heist, which saw hackers steal more than $230 Mn in crypto assets. In the aftermath, the Indian exchange filed an FIR with Delhi Police and even announced a bounty program to recover the stolen cryptos.

It also pitched a socialised loss strategy in August, which proposed making customers absorb 45% of the losses caused by the hack. However, the plan was shelved following user backlash. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.