WazirX, which lost $234 million in a hack, has filed an application with the Singapore High Court for a six-month moratorium.
It intends to develop a plan that allocates the impact from the cyberattack pro-rata across users.
Indian crypto platform CoinSwitch said it has “no choice” but to sue WazirX to recover its lost deposits.
Indian cryptocurrency exchange WazirX asked the Singapore High Court for six months’ protection while it restructures its liabilities after losing $234 million to a hack in July as rival CoinSwitch said it is likely to pursue legal action to recover assets deposited on the system.
The filing by Singapore-incorporated Zettai Pte, whose subsidiary Zanmai India operates WazirX, said a moratorium will give the company the time it needs to develop a restructuring plan, which “represents the most efficient way to address users’ cryptocurrency balances on the Platform and facilitate recovery for users,” according to a WazirX blog post on Wednesday.
An automatic moratorium of 30 days kicks in with the Aug. 27 filing, providing protection from possible legal action by CoinSwitch, which is seeking to recover $9.6 million worth of deposits it had on the platform. A date for the hearing on whether to grant a longer moratorium has not been scheduled.
“From the day of the incident, we have tried to be in constant touch with the WazirX team, seeking recovery of the funds that are stuck on their exchange,” CoinSwitch said in a post on X. “However, our efforts have not come to fruition, leaving us with no choice but to pursue legal action to recover the funds.”
WaxirX co-founder Nischal Shetty submitted an affidavit under the Zettai name to support the application. A dispute with Binance is ongoing over who owns the platform.
Under the “restructuring, the impact from the cyberattack will be allocated pro-rata across users who rank equally with each other as unsecured creditors, and users will receive a share of available token assets associated with the Platform proportionate to their share of all users’ unsecured claims for their account balances,” according to WaxirX’s blog post.
Among WazirX’s options, one is to engage a “suitable white knight,” Shetty’s affidavit said.
WazirX’s management is in talks with 11 companies, and at least some have “expressed interest in providing rescue financing or partnering,” some of which voiced concerns over the uncertainty related to possible legal action.
The filing revealed that the hack “caused a wave of panic” and “a real danger of an uncontrolled bank run of withdrawal requests that the Platform would not be able to meet.”
The platform has a user base of about 16 million users, of which around 4.4 million maintain cryptocurrency balances. As of Aug. 24, the platform has received more than 9,700 withdrawal-related emails and platform messages, and four legal notices.
Shetty provided a breakdown of the user balances on the platform as of 18 July, the date on which the exchange froze withdrawals. It showed that WazirX held $570,068,358 million for 4,353,299 users, 94% of whom are from India. WazirX still holds $284 million.
WazirX also said it had set aside $12 million in cryptocurrency tokens to meet anticipated costs for the investigations and legal expenses.
UPDATE (Aug. 28 13:27 UTC): Adds CoinSwitch legal threat starting in headline, search for “white night.”
