In the next few weeks, WazirX’s creditors will make a decision on whether they want to receive compensation as soon as April 2025 for lost crypto or face a long recovery process which could last until 2030.
This vote comes after a Singapore High Court decision allowing India’s embattled exchange to proceed with a restructuring instead of liquidation. This decision is dependent on the approval of three quarters or more of creditors to the recovery plan.
WazirX’s compensation program will be phased out, depending on whether the threshold was met. This plan includes creating a DEX (decentralized exchange), issuing tokens of recovery, and buying back affected users periodically.
Platform will have to be liquidated if it fails the vote. This process could last for years, and creditors may not get a return.
Divisive Proposal
WazirX’s proposed recovery plan has sparked controversy despite the company’s claims that creditors could recover up to 80% of their balances through its new DEX and recovery token model.
Some users are still skeptical. They argue that the delay of five years is more a strategy to force creditors into accepting the platform than an actual recovery.
Other people have expressed their anger at WazirX’s co-founder Nischal shetty. They claim that Shetty continues to exercise undue control over the process. The company’s past communication failures and its inability to recover stolen funds have only fueled distrust among investors.
Adding to the uncertainty, India’s government recently imposed a 70% penalty on undisclosed crypto gains. WazirX recovery token users could be subject to significant tax consequences as a result of this move, complicating their decision-making.
WazirX creditor’s will have to make a tough choice in the next few weeks. Either accept the restructuring and hope for a potential recovery, or take the risk of liquidation. This could be years away with lower payouts.
WazirX’s future depends on whether the result of the election is a rebirth or a decline into bankruptcy.
The Fallout
WazirX, once India’s largest crypto exchange by trading volume, was thrown into turmoil in July 2024 when hackers linked to North Korea’s Lazarus Group infiltrated its systems and drained over $230 million in user funds.
The thieves laundered stolen assets using crypto-mixing software designed to conceal transaction tracks, which left the platform little hope for recovering funds.
The hack exacerbated WazirX’s already precarious situation involving regulatory investigations. Since 2022, when India’s Enforcement Directorate frozen its accounts in an investigation against money laundering, regulators began to scrutinize the exchange.
The company has struggled with rebuilding trust, even though the accounts were unfrozen later. The Delhi High Court has ordered that a fresh investigation be conducted into the exchange in the wake of the hack.
WazirX came up with a plan of reorganization to deal the damage and avoid a total collapse. In Singapore, the company’s parent is licensed. The Singapore High Court ruled in favor of restructuring last month, granting WazirX a path to survival — if creditors agree.
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