In the aftermath of the recent cyberattack on Indian cryptocurrency exchange WazirX, the company has unveiled a grim reality for its customers – 43% of the lost funds are unlikely to be recovered, as indicated by the advice of the company’s legal team. During a virtual press conference held on Monday, WazirX co-founder Nischal Shetty, in collaboration with representatives from restructuring firm Kroll, shed light on the exchange’s strategy to undergo a restructuring process that could stretch over a period of six months.
The focal points of the impending restructuring will include the development of new revenue streams, efforts towards recovering the stolen assets, and providing faster withdrawal options for users in need of immediate access to their funds, the company disclosed.
The cyberattack that transpired, confirmed by WazirX on July 18, resulted in the loss of over $230 million from one of its multisignature wallets. This wallet was operated through Liminal’s digital asset custody and wallet infrastructure. An initial investigation conducted by the company pointed to a discrepancy between the data presented on Liminal’s interface and the actual content of the transaction as the root cause of the attack. Notably, suspicions arose that the attack may have been executed by the Lazarus Group, a notorious cybercriminal organization allegedly tied to North Korea.
Despite adhering to stringent security measures and best practices within the industry, such as maintaining a cold wallet and ensuring the security of hot wallets, WazirX found itself vulnerable to this new form of attack due to the compromise of a third-party entity, Liminal. Nischal Shetty acknowledged the unforeseen nature of the attack and the challenges posed by the compromised third-party system.
In the face of mounting pressure and challenges, WazirX finds itself embroiled in a legal tussle with CoinSwitch, another prominent Indian cryptocurrency exchange, which initiated legal action last week to recover approximately $9.7 million worth of assets trapped on WazirX’s platform. On Tuesday, the Singapore High Court is scheduled to consider WazirX’s plea for six months’ protection as it navigates through the process of restructuring its liabilities post the $234 million loss, accounting for nearly 45% of customer funds.
Shetty emphasized that WazirX is committed to narrowing the gap between the potential recovery and the lost funds, although he acknowledged that the current figures are subject to change as negotiations and discussions evolve in the upcoming weeks. He highlighted the ongoing negotiations and ideation phase, indicating that a clearer picture would emerge over the course of several weeks regarding the steps to bridge the existing gap.
As the cryptocurrency exchange grapples with the aftermath of the cyberattack and strives towards a successful restructuring process, the road ahead remains fraught with challenges and uncertainties. Despite the setbacks, WazirX appears determined to navigate through this turbulent phase and emerge stronger on the other side, albeit with valuable lessons learned along the way.