Hacked crypto exchange WazirX in talks with 11 global exchanges for capital infusion; signed NDAs with three

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WazirX’s parent, Zettai, is currently in different stages of talks with 11 global crypto exchanges for a capital infusion and support following a $230-million cyber heist, founder and CEO Nischal Shetty said in an affidavit to a Singapore court. The exchange has signed non-disclosure agreements (NDAs) with at least three exchanges.

While the affidavit didn’t disclose the names of all the potential partners, Moneycontrol had exclusively reported that WazirX tapped its former partner and the world’s largest crypto exchange Binance for support. A major chunk of the WazirX’s revenue is still controlled by Binance owing to its now disputed acquisition and partnership, sources had said.

Moneycontrol saw a copy of the affidavit filed by Shetty earlier this week seeking a 6-month moratorium to avoid getting legal notices from impacted customers and other parties, while it looks to restructure its business. WazirX lost more than 45 percent of its holding crypto assets in a security breach in one of its multisig wallets on July 18, following which it had temporarily paused withdrawals and trading on its platform.

WazirX is the largest crypto exchange in India. Nearly 33 percent of the Indian crypto investors either had accounts or held balances with the exchange at the time of the breach. At the time of the hack, it had over 16 million registered users, of whom around 4.4 million users have cryptocurrency balances in their accounts maintained with the platform.

“These 11 potential white knights comprise large and well-established players in the cryptocurrency market serving in the range of 5.5 – 100 million users, covering 500 – 1,000+ tokens, with daily transaction volumes ranging from $5 million – 4 billion. Progress on discussions range from informal conversations, to executed Non-Disclosure Agreements (“NDAs”) followed by active data provision in relation to potential collaboration options,” Shetty said in the affidavit.

“Three NDAs have been signed to date with prominent cryptocurrency exchanges with user bases in the range of 12 – 100 million users and between around $5 million and approximately $1.5 billion in daily trade volume,” he added.

At this preliminary stage, Shetty said that some of the “white knights” have expressed interest in providing rescue financing or partnering with Zettai. There are informal offers from potential investors to date including capital infusion to improve user recoveries, collaboration on various revenue-generating products and profit-sharing mechanisms, airdrops, assistance for the recovery of stolen assets through forensic analysis and litigation support, and the deployment of token assets to generate yield.

Between July 21, 2024 to August 2, 2024, the exchange had received four legal notices, the affidavit said. Moneycontrol had earlier reported that there has been a petition filed against WazirX and its partners with the National Company Law Tribunal (NCLT) in Indore. Recently, rival CoinSwitch also said that it has taken legal action against WazirX to recover the funds it holds with the exchange.

The affidavit mentions that even various Indian law enforcement agencies (LEAs) together held about $28 million in tokens with WazirX and those funds continue to remain safe and unaffected.

As of August 24 2024, the WazirX had received upwards of 9,700 withdrawal-related emails and platform messages.

WazirX’s ownership conundrum

According to the affidavit Zettai Pte, which is a Singapore registered entity, is the owner of WazirX platform’s parent company Zanmai Labs in India.

Now 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.

Shetty said in the affidavit, “Notwithstanding the ongoing dispute with Binance and up to 18 July 2024, the Platform continued to serve the cryptocurrency trading needs of its users, supporting an average daily trading volume of $3.5 million and average monthly trading volume of $107 million over the 12 months prior to 18 July 2024.”

“The Platform’s ability to support this operational volume has not changed and was not affected by the cyberattack of 18 July 2024,” he added.