The crypto world is buzzing with news of a lawsuit filed by CoinSwitch against its rival WazirX, as it attempts to recover over $9 million worth of assets that were allegedly trapped following a major cyberattack on WazirX. This legal battle comes in the wake of WazirX’s controversial response to the cyberattack, which involved a proposal to distribute the financial loss across its entire user base—a strategy referred to as “socialised loss”.
Background of the Dispute
In July 2024, WazirX, one of India’s largest cryptocurrency exchanges, suffered a cyberattack resulting in a staggering loss of $230 million (approximately ₹1,900 crores). CoinSwitch, another major player in India’s crypto market, found itself caught in the crossfire, with ₹810 million ($9.65 million) worth of its assets—including ₹124 million in fiat currency, ₹287 million in ERC20 tokens, and ₹399 million in other cryptocurrencies—trapped on WazirX’s platform.
CoinSwitch has consistently reached out to WazirX to recover the funds but was met with silence. After over a month of unsuccessful attempts, CoinSwitch decided to escalate the matter legally. The lawsuit aims to ensure that the recovery of funds isn’t left in limbo while WazirX works through its restructuring plan.
WazirX’s Restructuring and Moratorium Request
Facing the fallout from the cyberattack, WazirX’s parent company, Zettai, filed for a moratorium in Singapore’s High Court. The goal is to allow the company enough time to restructure its debts and develop a plan that could potentially restore some of the lost assets. Zettai’s restructuring proposal suggests that users, classified as unsecured creditors, would receive a proportionate share of any recoverable assets, with a projected timeline of at least six months for the entire process.
WazirX’s proposal to distribute the financial impact across its user base has sparked considerable backlash, especially since the company does not have insurance to cover customer funds. CoinSwitch, on its part, criticised the approach and highlighted the urgency of recovering its assets to maintain liquidity and ensure seamless operations for its users.
Implications for the Indian Crypto Industry
The lawsuit between CoinSwitch and WazirX highlights some of the major challenges faced by India’s cryptocurrency industry, which is already grappling with regulatory uncertainty and frequent security concerns. The incident has further eroded trust in the sector, especially given that this is one of the largest crypto heists in India’s history.
Despite the trapped assets, CoinSwitch has reassured its users that the impact is minimal—representing less than 1% of its total assets. The company has stated that it uses its treasury reserves to maintain a 1:1 ratio for user holdings, emphasising that its operations remain unaffected.
Looking Ahead: The Road to Recovery
The outcome of this legal dispute will be closely watched, not just by the stakeholders of both companies, but by the entire crypto community in India. For now, CoinSwitch continues to push for a resolution through the courts, while WazirX, under pressure, navigates the complex process of financial restructuring. Whether or not the courts will favor CoinSwitch in this crypto conflict remains to be seen, but one thing is certain: this case is setting a significant precedent in the evolving regulatory landscape of cryptocurrencies in India.
