CoinSwitch, a leading Indian cryptocurrency exchange, is pursuing legal action against rival WazirX to recover trapped funds, highlighting the extent of damage from a cyber attack that led to the theft of $230 million in digital assets
The action was taken more than a month after WazirX, one of the largest crypto exchanges in India, disclosed a security compromise and proposed a contentious “socialized loss” strategy that sought to distribute the loss across its entire user base.
CoinSwitch, an exchange aggregator, has approximately ₹810 million ($9.65 million) in assets currently stranded on WazirX’s platform. This comprises ₹124 million in fiat currency, ₹287 million in ERC20 tokens, and ₹399 million in other cryptocurrencies.
CoinSwitch stated in a detailed thread on X that they have tried to maintain regular communication with WazirX since the day of the incident. Still, they have been unable to resolve to recover the funds currently trapped on their platform.
According to the Bengaluru-based startup, the funds currently confined to WazirX account for approximately 2% of CoinSwitch’s total assets. Less than 1% of its assets are allegedly impacted by the alleged cyber attack, which primarily affected ERC20 tokens.
CoinSwitch, which is supported by investors such as a16z, Coinbase, and Peak XV, has announced that it is utilizing its treasury to ensure that users’ holdings on its platform remain at least 1:1. The company stated that the user assets invested through its platform are 1.51 times the company’s overall assets.
To guarantee its users a seamless trading experience, CoinSwitch maintains a small portion of its liquidity, approximately 7% of its reserves, on third-party exchanges.
The ongoing challenges India’s cryptocurrency industry has encountered, including regulatory uncertainty and security concerns, are underscored by CoinSwitch’s lawsuit. The WazirX incident, called India’s most significant crypto theft, further eroded the sector’s trust.
WazirX announced last month that it intended to recommence operations within a week of the attack. The company proposed to return only 55% of customer holdings, while the remaining 45% would be locked in USDT-equivalent tokens.
Nischal Shetty, the founder of WazirX, had previously stated that the company did not insure consumer funds due to a lack of viable alternatives. He warned that the success of recovery efforts was not guaranteed and could take years.
Shetty did not respond promptly to a request for comment.
