Hacked crypto exchange WazirX will only be able to return around 55-57 percent of the users’ crypto funds going by the initial restructuring plan, the exchange’s legal advisors said in a town hall on September 2 following the $230-million cyberattack.
WazirX has hired Kroll to help it through the legal procedures related to its restructuring plans after it lost nearly 45 percent of its crypto asset holdings in a cyber theft last month.
“55-57% of the funds in crypto terms can be returned to the users with the benefit of these restructuring plans,” said Jason Kardachi, managing director, restructuring at Kroll.
Kardachi, however, added that the management is looking at more options to be able to return more funds to the users.
“There are ongoing discussions through which we hope to generate additional money to be able to return to users. Second way would be if we are capable to recover the stolen crypto and ongoing investigation in relation to that. Thirdly through the platform, if we are able to restructure arrangement with the creditors, we hope to have profits in the future which will be shared with the creditors,” he added.
Nischal Shetty, founder and CEO, WazirX said, “We are not in a position to say much today because we are in the negotiation and ideation stages. These are just the current numbers…WazirX is a large platform whose ownership is disputed so we can’t sell it. So we are looking for partnerships.”
To be able to continue with the restructuring and seek a 6-month moratorium to avoid any legal actions, WazirX’s Singapore parent Zettai had filed an affidavit on August 27 with a Singapore Court. The hearing of this case will be on Tuesday, September 3.
In the affidavit, Shetty had shared that the exchange is also in different stages of talks with 11 global crypto exchanges for a capital infusion and support. The exchange has signed non-disclosure agreements (NDAs) with at least three exchanges.
“The expected time of 6 months is due to the huge work needed to develop the plan, socialise and understand the feedback from the creditor base. There are 4.3 million creditors and we will be taking feedback from them – legal timelines will be needed to associate with Singapore’s legal procedure,” said George Gwee, director at Kroll.
Kardachi added, “We can never get all 4 million plus people to agree on the same plan. It’s unfortunate that we had to take so much time.”
Around $12 million worth of user assets has been set aside to fund expenses of investigations, operations, restructuring and legal costs.
WazirX also held over $28 million-worth of crypto assets for various Indian law enforcement agencies (LEAs) but those funds have remained safe, Shetty said.
Also read: Distress call: Hacked WazirX dials Binance for lifeline
Disputed ownership
The biggest caveat for the exchange and its users have been the disputed ownership of the exchange between Zettai and Binance, which is also complicating the negotiation talks with other global exchanges for a possible bailout and partneship. In India, WazirX is run by Zanmai Labs (whose parent is Zettai).
Explaining the ownership structure, Shetty said, “Most exchanges would have a Singapore based entity, Indian entities come in when they have INR involved. At the time of banking ban in India, WazirX didn’t offer INR, it was only crypto-to-crypto trading. Around the same time WazirX was getting sold to Binance which happened through the Singapore entity (Zettai). After acquisition, INR deposits started in March 2020.”
Interestingly, Zanmai Labs was incorporated in December 2017 and Zettai was started in January 2019. In 2019, Zettai had sold the platform to Binance, following which the latter too had put out a blog post announcing the acquisition.
The spat between Binance and WazirX started back in August 2022, when the Enforcement Directorate (ED) had frozen bank assets of WazirX worth Rs 64.67 crore in relation to allegedly assisting a bunch of accused loan apps in money laundering and fraud through the transfer of virtual crypto assets.
Following this, Binance’s CEO Changpeng Zhao (CZ) took to X (then Twitter) to clarify that his firm didn’t own any equity in WazirX and nor did it control its operations.
Gwee said that Zettai continues to hold the crypto deposits and business for the exchange “under protest” while the INR deposits and trading come under Zanmai Labs. But revenues, cash flows or profits of Zettai goes to Binance’s books.
“Zanmai, the Indian entity will not be a part of the restructuring,” he added.
Also read: Sent records to CERT-In, in touch with FIU, regulators: WazirX’s Nischal Shetty
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