WazirX, the Indian cryptocurrency exchange that suffered a loss of $230 million in a cyberattack, has devised a controversial recovery plan that would impact all the platform's users, even those who were not affected by the attack. The platform did not insure clients’ funds.
According to a blog post published by the exchange on Saturday, the “socialisation” of the losses and the distribution of the impact among all users have been proposed. However, the exchange will conduct a vote on the controversial proposal by August 3.
Users Suffer Due to the Lack of Insurance
Crypto exchange hacks are not new. Even the big brands have suffered massive cyberattacks; while most survived, some had to shutter their business. Nowadays, as a precautionary measure, reputable crypto exchanges insure customer deposits.
However, WazirX did not buy any insurance to safeguard customer deposits in such circumstances. The platform’s founder, Nischal Shetty, also confirmed on Friday that he did not insure customers' funds due to a lack of viable insurance options.
“We are implementing a fair and transparent socialised loss strategy to distribute the impact across all users equitably,” the exchange noted. “In similar situations, users have often faced years of uncertainty and limited access to funds. Our 55/45 approach offers a faster, more flexible solution.”
We’re listening to all the feedback from everyone. While the poll is ongoing, we’ll work on figuring some more options.Ultimately, we want to ensure we are able to find a path in the best interest of everyone. Only with your support we can move ahead.
— Nischal (Shardeum) ???? (@NischalShetty) July 28, 2024
“Fair and Transparent Socialised Loss Strategy”
Under the plan, 55 percent of the assets of all users on the platform, including the ones who suffered the attack and those who did not, will be available for trading and withdrawals. For users who were not impacted by the attack, 45 percent of their assets would be locked.
“Users with 100 percent of their tokens in the ‘not stolen’ category will receive 55 percent of those tokens back. The remaining 45 percent will be converted to USDT-equivalent tokens and locked,” explained WazirX, calling it a “fair and transparent socialised loss strategy to distribute the impact equitably.”
The proposed recovery plan would also unlock 55 percent of the assets of the users who were impacted by the cyberattack. The unlocking of the rest of the assets, for both impacted and non-impacted traders, would be based on the recovery efforts of the exchange, and no timeline was specified.
“Unlocking of locked tokens will be subject to ongoing recovery efforts,” the exchange added. “This includes tracing and recovering stolen assets, collaborating with partners to cover the deficit, and exploring compensation methods, including potential airdrops.”
Notably, the proposed plan applies only to users’ crypto asset holdings on the platform, not their Indian rupee balances in the accounts. The exchange also clarified that hackers only siphoned crypto assets, not fiat holdings.
This article was written by Arnab Shome at www.financemagnates.com.
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