WazirX Hack Update: Customers Unlikely to Recover Full Funds

• WazirX's legal advisors believe that a full recovery of the funds lost in the July breach is not possible.
• They're hoping for a 55-57% recovery rate. This means that even in the best-case scenario, 43% of the funds will be lost.
• The company is doing its best to compensate the users; restructuring is already underway, but such massive losses are certainly going to wipe away customer trust.

WazirX, the leading cryptocurrency exchange in India, was hit by a security breach on July 18, 2024. It now has an update for its customers, and it's not looking good.

According to WazirX's legal advisors, the users affected in the breach are unlikely to recover 100% of their lost funds despite the ongoing restructuring.

Note: Restructuring is the process of reorganizing the finance, operations, and administration of an organization after a crisis. In this case, WazirX is trying to compensate the affected users by distributing its remaining digital assets in proportion to the severity of their individual loss. It might also consider sharing profits with the affected users.

The news came from a conference call held by George Gwee, a director at restructuring firm Kroll (the firm that's helping WazirX with the process), for journalists. On the call, he said that they're expecting a recovery rate of 55-57%. This means that at least 43% of the funds will not be recovered.

However, not all hope is lost. Jason Kardachi, managing director at Kroll, said that if the overall crypto market improves, customers might be able to recover more of their lost funds.

The platform is doing its best to compensate the users. For instance, it suggested a 55/45 approach." Under this, all users - even those who haven't been affected by the breach - will be allowed to trade only 55% of their tokens. The remaining 45% will be converted into stablecoins and locked.

This would have allowed the platform to distribute the losses so that no individual user had to take a massive hit. However, as expected, this proposal received a lot of backlash and had to be dropped.

About the WazirX Security Breach

On July 18, WazirX confirmed that it had suffered a security breach where the attackers stole assets worth $234.9 million. The platform's total holding at the time was $500 million, so losing around half its assets made this breach a devastating blow.

A breakdown of the stolen assets was provided by Lookonchain. According to it, the stolen assets included more than 200 cryptocurrencies, including 640 billion Pepe tokens, 5.43 billion SHIB tokens, 135 million Gala tokens, 20.5 million Matic tokens, 5.79 million USDT, and 15,200 Ethereum tokens.

A huge part of these assets have already been sold by the hacker(s) through the on-chain exchange Uniswap. The rest of the funds are being moved using Tornado Cash (as per reports from Tuesday).

Since Tornado Cash allows users to exchange tokens while hiding their wallet address, it's often used by criminals who want to mask their trail.

Even worse, no information has, so far, been dug up about the threat actors behind the breach. However, some industry experts believe that it might be the North Korean hacking group Lazarus.

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