WazirX Offers 85% of Stolen User Funds as Deadline Nears

WazirX plans to distribute 85.25% of the portfolio value lost in the $230 million hack from July 2024. The exchange completed asset rebalancing on Tuesday, ensuring that affected users will start receiving their refunds in April.

WazirX 85.25% fund distribution to creditors | Source: WazirX

As of Tuesday, users can now view both their U.S. dollar and Indian rupee balances, reflecting the value of stolen assets from the July attack. The redistribution plan involves allocating upside gains from unstolen tokens, which means users will recover more than initially expected.

However, creditors must act fast—February 19 is the deadline to accept the rebalancing scheme. A majority vote of 75% is required for the plan to move forward.

However, if creditors reject the scheme, the restructuring effort will collapse, pushing the company towards liquidation under Section 301 of the Singapore Companies Act. This could lead to a fire sale of remaining assets, resulting in significantly lower compensation for creditors. In the worst-case scenario, the entire process of recovering and redistributing funds could stretch out until 2030.

WazirX roadmap shows that redistributing funds could stretch out until 2030 | Source: WazirX

The original breach of $230 million occurred on July 18, 2024, when a multi-signature wallet managed by WazirX under Liminal Custody’s oversight was compromised. More than $100 million in Shiba Inu (SHIB) and $52 million in Ether were siphoned, among other assets. However, both WazirX and Liminal denied that their networks were compromised, but later on, the exchange filed for debtor protection in Singapore.

The funds lost in the attack represented nearly half of WazirX’s total reserves, as reported in June 2024. The breach was attributed to the notorious North Korean hacking group Lazarus, known for executing high-profile cyber heists in the digital asset industry.

Suspects of WazirX hack identified as part of North Korean Lazarus group | Source: Trader Mike

To avoid liquidation, WazirX is taking a bold approach. The exchange plans to launch a decentralized exchange (DEX) and introduce recovery tokens that will be tradable in the open market. These tokens will be periodically bought back using platform profits and new revenue streams over the next three years.

If the plan gains approval, WazirX will strategically relaunch its platform with enhanced security and expanded capabilities. The exchange has also hinted at a shift towards a decentralized business model to improve recovery margins for creditors. The strategy includes profit-sharing, recovering illiquid wallet assets, and seeking partnerships with white knight investors to strengthen the exchange’s financial position.

WazirX has taken steps to improve transparency following the hack. The platform introduced three new tabs on its mobile app and website, allowing users to view their rebalanced portfolio, check their balance as of July 18, 2024, and access a preliminary creditor list. Co-founder Nischal Shetty shared a screenshot of these updates on X.

WazirX platform shows ‘Rebalanced Portfolio’ option for users | Source: WazirX

As the February 19 deadline approaches, creditors must decide whether to accept the compensation scheme. If they approve it, WazirX will move ahead with its restructuring plan, including the launch of its DEX and recovery token program. However, liquidation will be the only path forward if the plan is rejected, potentially leaving creditors with much lower payouts.