India’s cryptocurrency exchange WazirX has revealed that 43% of customer funds lost in a recent cyberattack are unlikely to be recovered, according to the company’s legal advisers.
In a virtual press conference on Monday, WazirX co-founder Nischal Shetty, alongside representatives from restructuring firm Kroll, discussed the exchange’s plans to undergo a restructuring process that could take up to six months.
WazirX Restructuring and Potential Recovery
The restructuring will focus on creating new revenue streams, recovering stolen assets, and offering faster withdrawals for users who need quick access to their funds, the company stated.
The cyberattack, which WazirX confirmed on July 18, involved the loss of over $230 million from one of its multisignature wallets. The exchange reported that the wallet was operated using Liminal’s digital asset custody and wallet infrastructure.
According to the company’s preliminary investigation, the attack stemmed from “a discrepancy between the data displayed on Liminal’s interface and the transaction’s actual contents.” The attack is suspected to have been carried out by the Lazarus Group, a notorious cybercriminal organization allegedly backed by North Korea.
“We followed industry-best practices, maintained a cold wallet, kept hot wallets small and made sure those were secure. But this was a new kind of attack. We had a third-party (Liminal) that was also compromised,” Nischal Shetty of WazirX stated.
When asked about potential legal action against Binance and Liminal, whose system was allegedly compromised, WazirX representatives did not provide a clear answer. However, the company did confirm ongoing talks with a potential white knight investor, clarifying that the capital won’t be raised against equity due to an ongoing dispute with Binance, the world’s largest cryptocurrency exchange.
Pressure Mounts on WazirX
The situation has become more complicated for WazirX, as CoinSwitch, another major Indian crypto exchange, initiated legal action last week to recover approximately $9.7 million worth of assets stuck on WazirX’s platform.
On Tuesday, the Singapore High Court will hear WazirX’s request for six months’ protection while it restructures its liabilities after losing $234 million, some 45% of customers’ funds, to the hack in July.
Shetty said the company’s objective is to reduce the gap between the potential recovery and the lost funds, but he acknowledged that the numbers are as of Monday and may change in the coming weeks as negotiations and discussions progress.
“You’re not in a position to see it today because we’re in negotiation, in ideation stage,” Shetty said. “Over the next several weeks, it will be easier and clearer on each stage where we can fill the gap,” he added.