WazirX To Set Up Committee Of Creditors After $234 Mn Hack

WazirX has announced that it will form a committee of creditors (CoC) by October 9 as the cryptocurrency exchange rushes to restructure its liabilities after suffering a massive $234 Mn hack that left millions of Indians with substantial losses.

The 10-member creditors’ committee, which will comprise users affected by the hack, will give WazirX advise and feedback on its restructuring plan, it said in a blog post.

The development comes days after a Singapore court granted WazirX a four-month conditional moratorium to restructure its liabilities. In a recent town hall, the exchange’s legal advisors said that WazirX customers are likely to get back only 55-57% of their funds even after the restructuring.

“The COC aims to be representative of the broader Creditor base in selection criteria, and COC members represent the interests of all Creditors (not just their own),” WazirX said.

The hacked crypto exchange added that the CoC will focus on creating restructuring terms acceptable to other creditors. However, its role will be completely consultative. While it will have the same voting rights as other creditors on matters of restructuring, WazirX is not obligated to accept their recommendations.

To set up the CoC, WazirX said it will distribute creditors by count and value of their claims against the exchange to ensure adequate representation.

“The company will first establish a “Contingent Creditor Pool” by segmenting creditors into tranches of 10% each based upon the total value of claims (each a “tranche”) – creditors will be sorted in terms of smallest claims to largest claims, with this overall list being broken into 10 separate tranches each representing 10% of claims, with the sum of all tranches amounting to USD 546.5 Mn of claims,” WazirX said in a statement.

“Within each tranche, 1% of creditors will be selected at random to establish the Contingent Creditor Pool (~43k Creditors out of ~4.3m Creditors in total), allowing every creditor an equal chance of selection by count within their tranche, which has already been adjusted by value to mitigate impact from the significant numbers of creditors with low Claims,” it added.

Affected users will be chosen at random to be part of the contingent creditor pool. They can either volunteer to be part of the CoC or reject their selection.

In July, WazirX suffered a massive attack on one of its multisig wallets that resulted in loss of digital assets worth over $230 Mn. These stolen funds represent more than 45% of WazirX’s total reserves. The exchange has since initiated a restructuring process to address its liabilities.

WazirX founder Nischal Shetty has blamed various parties for the security breach during this period while denying any responsibility. First, he pointed finger at custody wallet platform Liminal for security lapses, which Liminal denied last month. 

In August, Shetty tried to shift the blame on Binance, alleging that the exchange held a majority of Zettai Labs’ funds. Zettai Labs is the parent company of WazirX. Binance has since rejected any claims of wrongdoing and accused Shetty of ‘falsely implicating’ it in the $230 Mn hack.