Legal Experts Cast Doubt on Full Crypto Recovery for WazirX Users

Coinspeaker
Legal Experts Cast Doubt on Full Crypto Recovery for WazirX Users

WazirX customers are unlikely to recover the full value of their crypto holdings following a massive hack that resulted in a $234 million loss in July. According to legal experts involved in the restructuring process, the chances of making users whole in crypto terms are extremely slim.

During a press conference, George Gwee, a director at restructuring firm Kroll, disclosed that customers are expected to recover only 55% to 57% of their funds, with at least 43% of the value likely being unrecoverable. “In crypto terms, it’s extremely unlikely that we can make people whole,” added Jason Kardachi, a managing director at Kroll. He emphasized that while contributions from third parties or improved market conditions could aid recovery, the extent of the loss makes it unrealistic to expect a full restoration of funds.

On Tuesday, the Singapore High Court will hear WazirX’s request for six months of protection from creditors as the company seeks to restructure its liabilities. This court decision is crucial, as it will determine how WazirX can move forward with its restructuring efforts and whether additional time will be granted to address its financial obligations. Given the scale of the hack, the court’s decision could influence future regulatory policies and industry practices, potentially reshaping how digital asset platforms operate during crises.

The restructuring process is further complicated by an ownership dispute between WazirX and Binance, the world’s largest cryptocurrency exchange. Binance announced its acquisition of WazirX in late 2019, but the deal was later contested, leading to the termination of Binance’s tech services to WazirX in 2022. This dispute has added another layer of uncertainty to the restructuring efforts, as the exchange seeks to clarify its ownership status while negotiating recovery plans.

WazirX co-founder Nischal Shetty acknowledged these complications, stating that while the current figures are as of Monday, efforts are underway to close the gap in recovery. The restructuring plan includes distributing remaining token assets to users on a pro-rata basis and exploring options for additional capital through potential white knight investors.

The July hack, which remains the largest cryptocurrency theft in India, has had a severe impact on WazirX’s financial stability. While the company has proposed measures to address the loss, including socializing the “force majeure” impact, the scale of the theft poses significant challenges.

Customers are advised to stay informed about the ongoing proceedings and prepare for the likelihood of a partial return of their assets. Legal experts suggest that users should manage their expectations given the challenging circumstances surrounding WazirX’s restructuring efforts. Additionally, understanding the legal protections and options available to them during this restructuring period may help users make informed decisions about their next steps.

Legal Experts Cast Doubt on Full Crypto Recovery for WazirX Users