WazirX shelves plans to socialise losses; in advanced talks with other exchanges
After facing severe backlash from customers and the crypto community on whole, WazirX has shelved its plans to socialise losses and is now looking for a cash injection to fill the $230 million hole in its assets even as they work with agencies to get back a portion of the customers’ lost funds.
Sources in the know told businessline that WazirX is pursuing partnership agreements with a mix of foreign and Indian exchanges, some of which could be in the advanced stage.
The crypto community went up in arms last month when WazirX proposed to “socialise losses” after losing 45 per cent of their digital assets in what is considered to be the biggest crypto hack in recent years.
In effect, to get its exchange up and running WazirX would redistribute its existing assets amongst all of its customer wallets which means that all wallet holders on the exchange will be getting a 45 per cent haircut even if their tokens were not affected by the July 18 hack. After its proposal, WazirX put the matter up for a poll which was recently concluded over the weekend. While CEO Nischal Shetty was reticent to reveal the result of the poll, sources indicated that a section of customers are against WazirX’s decision to socialise losses at all, making partnership the only natural course.
Experts believe that WazirX continues to be a valuable asset which will invite interest from foreign exchanges hoping to enter the India market. “Before the crypto hack, WazirX was a prized asset, with India’s potential to become one of the largest crypto markets in the world; the appeal for many exchanges pursuing partnerships with WazirX could be the opportunity to enter a market which has immense potential to grow,” an industry expert said.
Most assets still intact
With over $220 million of the $230 million assets still intact and not liquidated by hackers yet, WazirX is hopeful that a portion of these assets will be recovered once negotiations commence. In recent years exchanges like Euler Finance, Poly Network and Wormholehave been able to recover the majority of their lost funds to similar crypto hacks.
Typically, exchanges globally refuse to receive transactions from these “tainted wallets” where these hacked funds are parked, opening a door for negotiations and likely return of funds after a particular ransom is paid. Funds recovered can range from 50 per cent to 80 per cent of the stolen accounts as per historic data. WazirX also issued a $23 million bounty to recover stolen assets two weeks ago.
What is more significant is the fact that the exchange has been closed since the July 18 hack, and customers continue to remain in a limbo regarding when they expect to see their funds returned. CEO Shetty told customers on August 3 that they will soon be updating them about the likely course of auction for the exchange but so far after dropping the idea to socialise losses, he hasn’t given a concrete update.