Crypto exchange WazirX has an asset deficit of 45% and withdrawals could take 6 months

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Crypto exchange WazirX’s users have raised concerns as the exchange reveals a 45% asset deficit following a cyberattack in July 2024. The company can reportedly only return up to 50% of funds, with withdrawals expected to take at least six months.

Amid its restructuring efforts taking place during a moratorium, users are worried about transparency and voting processes. WazirX has said in a blog that it will improve communication and introduce “Proof of Reserves” to enhance trust.

WazirX reveals asset deficit to creditors in Q/A

Investors with the Indian crypto exchange WazirX are worried about the recovery of their funds and a recent chat log reveals the exchange has an asset deficit of 45%.

Zettai Pte. Ltd. posted the chat box of the Zoom webinar hearing of HC/OA 861/2024 from 25 September. A user enquired why WazirX has promised to return only up to 50% of the funds. The company explained that Zettai Pte. Ltd. had reported liabilities of $546.5 million at the time of the cyberattack on July 18. The response adds, “As of 23 August 2024, Assets /Liabilities = 55, resulting in an asset deficit of 45%.” Meanwhile, the restructuring plan aims to improve recoveries through partnerships, revenue-generating products, and asset recovery efforts.

The court had asked Zettai to address questions from creditors during a recent hearing. The responses were provided by the exchange in a public blog on October 17.

Other users were also concerned with the lack of transparency and the voting process for the moratorium application. A user named Ujjwal Rattan claimed that the initial voting options did not allow for disapproval, which potentially impacted the results. Zettai emphasized that the moratorium would provide time to find solutions and make good user losses.

Another user, Anand Sharma, claimed that some users did not participate in the voting but WazirX took their votes in support. Sharma accused WazirX of manipulating the results in their affidavit by including informal votes against court directions. In response, WazirX explained that the informal survey was initially created to gauge general support.

The exchange claims that it later updated the survey to include all three voting options in line with the court’s direction. The company also points to an email error for the confusion as 9,000 users who hadn’t participated in the voting received follow-up emails of their support. They confirmed that future electronic votes, as directed by the Singapore court, will involve an independent party to verify the process.

Meanwhile, users are currently unable to withdraw their funds. Zettai stated that withdrawals would only be possible after a restructuring proposal is approved by creditors and sanctioned by the Singapore High Court. The company also underlined that the process could take at least six months.

WazirX users raised transparency concerns

Users also raised concerns about the distribution of losses, particularly for non-ERC20 token holders. Zettai clarified that all users’ claims would be treated equally in the restructuring process despite the breach impacting Ethereum and Gala specifically. The company explains that users do not hold specific tokens. “General users have a claim for the value of their token deposits on the platform,” Zettai added.

Users questioned the use of their funds for legal and operational costs during restructuring. Zettai explained that these costs are necessary to maintain the platform and they are actively seeking external financing to cover these expenses. Additionally, users also called for better communication and transparency regarding the restructuring process and the financial status of the exchange. With that, the ongoing ownership dispute with Binance is also impacting the case.

According to the company, the two exchanges will have to settle the dispute before any claims regarding the ownership of the WazirX platform and its cryptocurrency tokens can be made. The exchange revealed that Zettai currently holds the tokens under protest after Binance gave up control. However, since the dispute is confidential, WazirX said that no timeline can be provided.

WazirX operates 240,000 wallets

In a separate email communication with the creditors, WazirX shared the legal affidavit filed by Nischal Shetty, co-founder and director of Zettai, in the High Court of Singapore. The document underlines that as of October, Zettai holds about $284 million in crypto across its wallets. A list of around 240,000 wallet addresses was also revealed in the affidavit.

In this regard, the exchange explained in a blog, “While this number might come as a surprise, it’s essential to remember that for an exchange like ours, handling hundreds of thousands of wallets is normal – there are approximately 4.3 million users with crypto balances, which requires a complex network of wallet addresses,”

WazirX had added that it plans to boost transparency by introducing “Proof of Reserves” (POR), which will show users how their assets are managed.

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