Indian cryptocurrency exchange WazirX made a significant announcement regarding the recent security breach that led to a $230 million loss. The firm revealed its plan to distribute this loss among all its customers, which has caused a stir in the local crypto community.
Following the cyber attack that compromised a large portion of its reserves, WazirX took the step to suspend all trading activities on its platform. However, the exchange aims to resume operations within a week while implementing a “fair and transparent socialized loss strategy” to distribute the impact equally among its user base.
As part of this strategy, WazirX will rebalance customer portfolios by returning 55% of their holdings and locking the remaining 45% in USDT-equivalent tokens. This distribution will also affect customers whose tokens were not directly impacted by the breach. Even users with tokens in the ‘not stolen’ category will receive only 55% of those tokens back.
The security breach resulted in the theft of more than 200 different cryptocurrencies, with popular tokens like Shiba Inu (SHIB), Ethereum, Polygon’s MATIC, and the meme cryptocurrency Pepe being the most affected. The cyber attack exploited a discrepancy between the data displayed on multisignature wallet provider Liminal’s interface and the actual transaction contents.
WazirX has provided users with two options for moving forward. Option A allows customers to trade and hold their assets with a higher priority for recovery efforts but restricts withdrawals. On the other hand, Option B permits trading and withdrawals but places users at a lower recovery priority. Users can switch between these options under certain conditions.
During a call with the community, WazirX founder Nishal Shetty clarified that the firm did not insure customer funds due to the lack of viable options. He also highlighted that the recovery process might not be successful and could potentially take years to complete.
In response to the distribution of the loss among customers, some WazirX users questioned why the firm did not utilize its own profit reserves to compensate customers or reduce the impact of the breach. This move has raised concerns among the community regarding the exchange’s control over users’ crypto assets.
Nikhil Pahwa, a prominent policy voice and editor, emphasized that by taking control of users’ crypto assets, WazirX is not just acting as an exchange but is also accessing and redistributing cryptocurrencies from user wallets. This has led to a debate about the role and responsibilities of cryptocurrency exchanges in such situations.
Overall, WazirX’s decision to distribute the security breach loss among customers has sparked discussions within the crypto community about transparency, accountability, and the protection of user funds. The exchange’s approach to handling the aftermath of the cyber attack will likely have long-term implications for its reputation and relationships with customers.
