WazirX's $234 Mn crypto heist has unveiled serious security flaws and mismanagement, with several burning questions over founder Nischal Shetty's role and the platform's future
In this deep dive into the WazirX saga, we look at how the hack was orchestrated, the various players involved and why many former employees at the company lay the blame at the feet of the founders
Now, the startup is looking at multiple ways to salvage the situation, but users allege that the company is not being transparent about how it will remedy their losses
“The founders, particularly Nischal Shetty, made a grave mistake by ghosting WazirX for two years and doing other projects. And suddenly they appeared out of nowhere this year. The July 18 attack is just a culmination of many of their mistakes—this was a disaster waiting to happen,” a former WazirX employee. Speaking to Inc42, a Liminal spokesperson said, “WazirX was using self-custodial software, not our custody service. The wallet was actually in the client’s custody, with the customer holding 5 out of the 6 keys required to control the wallet.”On July 28, 2021, after Patel agreed to the purchase agreement, Schroder wrote: “Thank you, Tushar. We will start the transfer process and keep you posted.”“At this point, Shetty did not fully disclose the situation to traders and investors. He did not reveal the heightened risk investors would face after the ownership dispute with Binance,” said another cofounder of a leading Indian exchange.In response to Inc42’s queries, Binance stated that it did not acquire, nor does it own or operate, the WazirX platform, Zettai Pte Ltd, Zanmai Labs, or any of its affiliates. This includes operations related to P2P transactions on WazirX. Any claims suggesting that Binance controls or owns these transactions are incorrect, the spokesperson said. “Technically, you have already breached the NDA in the past. You could at least share the nature of the lawsuit with Binance. We don’t even know the title of the lawsuit. That’s what is disturbing,” the WazirX user added. Inc42 spoke to Hemant Tiwari, DCP, IFSO, Delhi Police who is supervising the investigation. Tiwari said that the complaint was registered only a couple of days before August 5, 2024. Initially, the WazirX team had filed the complaint with Mumbai Police where the FIR was not registered and the complaint with Delhi Police came after this, and the FIR was registered thereafter. Unocoin’s cofounder Sathvik Vishwanth also agreed that WazirX should not have kept INR 100 Cr set aside to fight the legal battle and said it should not have applied for a moratorium. “Once the business stops, everything stops. Instead, WazirX could have immediately returned the remaining amount to the users and could have continued the operation. This could have offered better chances to recover in the next 12 months.”“Whose responsibility is it to regulate cryptos if taxation is allowed? The Indian government has been charging 30% tax on all profits, even when there are losses on other crypto transactions. For what? If they can’t step up and help investors in these unprecedented times?” asked Praveen Singh, an investor with the WazirX platform.
On July 18, 2024, social media was abuzz with news of India’s largest crypto heist, as WazirX reported $234 Mn worth of cryptocurrencies stolen from one of its wallets hosted on Liminal, an institutional digital asset custody platform.