WazirX Hack: Consumer Commission Dismisses Investors’ Complaint

The National Consumer Disputes Redressal Commission (NCDRC) declined to entertain a plea of a group of investors of WazirX who claim to have suffered losses due to the $234 Mn cryptocurrency hack at the crypto exchange.

In an order dated March 13, the consumer forum said that “the legality and the nature of the transactions are still not regulated to the extent as required” in the country and therefore conducting investigation into the illegalities of the matter “does not seem to be amenable to this jurisdiction”.

Aman Rehaan Khan, the advocate representing the complainants, told Inc42 that they plan to move the Supreme Court.

“We plan to take this matter to the Supreme Court and seek recovery of lost funds and criminal proceedings against the entities and individuals involved in the matter,” Khan said.

The lawyer said that while the decision was a setback, there were some positives from the consumer forum’s order. He said that the forum agreed that cryptocurrencies are defined as ‘goods’ under the Consumer Protection Act and also fall under the ambit of property under the Income Tax Act.

The complaint was filed by 40 investors who claim to have lost around INR 12 Cr (around $1.4 Mn) worth of lost cryptocurrency.

Will The Plea Hold In The Supreme Court? 

Crypto is currently not a legal tender in India. However, the government charges 30% tax on profits made from trading crypto. Besides, all crypto exchanges operating in the country have to be registered with the Financial Intelligence Unit (FIU) under the finance ministry.

While the government planned to table the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in the Parliament in 2021, it didn’t go ahead with it. The issue has been put on a back burner since then and the space stays unregulated till date.

Now, it remains to be seen if the Supreme Court will entertain the plea. In 2020, the court lifted the ban on trading of cryptocurrency in India, which was in place since 2018 on RBI’s directive.

A couple of years ago, the SC also chided the Centre for failing to define rules for trading cryptocurrency in India and not defining who would be responsible for investigating cases pertaining to forgery of crypto.

What’s WazirX Plan To Pay Back The Customers? 

The Nischal Shetty-led crypto exchange plans to undertake a restructuring exercise to help customers recover some of the lost amount.

Under the scheme, WazirX will release liquid assets worth $284 Mn and issue recovery tokens to its users. Following the rebalancing of liabilities, the rebalanced liquid assets would be distributed in tokens to scheme creditors.

The plan also includes the reactivation of the WazirX platform, with the launch of a decentralised exchange and new capabilities. The profits generated in the first 3 years after reactivation would be used to fund the recovery token purchases.

Two months ago, the Singapore Court gave its nod to the crypto startup to initiate its restructuring scheme. Last month, WazirX said it completed the rebalancing of its liquid asset as part of the restructuring plan. As the restructuring goes through, it would allow its users to claim back their stolen cryptos by April.