In a move to rectify the fallout from one of the worst crypto thefts globally, Indian cryptocurrency exchange WazirX has announced the reversal of all trades executed on its platform after July 18. This decision aims to restore user balances to their pre-hack state and mitigate the impact of the $234.9 million theft.
The breach, which occurred in July, was one of the most significant in the history of Indian cryptocurrency exchanges. The hack primarily targeted WazirX’s Safe Multisig wallet on the Ethereum blockchain. Multisig wallets, known for requiring multiple signatures to authorize transactions, are generally considered secure. However, this attack exploited discrepancies between the data displayed on WazirX’s digital custody platform, Liminal, and the actual transaction contents.
The security firm Cyvers was among the first to detect the breach, identifying a series of suspicious transactions that indicated a coordinated attack on WazirX’s wallet infrastructure. In the immediate aftermath of the attack, WazirX decided to put a freeze on all withdrawals on its platform at 1 PM IST on July 18, 2024. Despite this, the exchange continued to allow trading on the platform for an additional three days before suspending it entirely. This decision to permit trading during such a critical period has been met with significant backlash from the user community, many of whom were unaware of the breach while continuing to trade.
Still, while the decision to suspend trading was ultimately made to prevent further financial loss, numerous transactions had already taken place in the intervening period. Now, the crypto exchange aims to ensure a fair outcome for all users, involves restoring all user balances to their state as of 1 PM IST on July 18, 2024. The reversal will render all trades executed between July 18 and July 21 ineffective, effectively nullifying any gains or losses incurred during this period.
According to WazirX, the restoration process will take place over several days, with affected users receiving email notifications detailing the impacted trades. The exchange has also committed to reversing any fees, referrals, or Tax Deducted at Source (TDS) implications associated with these trades. In the meantime, trading and withdrawals on the platform remain suspended as the restoration process continues.
Unsurprisingly, the decision to reverse trades has been met with mixed reactions from WazirX’s user base, which numbers over 16 million. Initially, the exchange faced significant criticism for its handling of the situation, particularly regarding a proposed ‘socialized loss strategy.’ This strategy, which involved partially restoring user balances while converting a portion of stolen tokens into USDT-equivalent tokens, was widely condemned by users and industry experts alike. In response to the backlash, WazirX revised its approach, opting instead for a full restoration of balances to their pre-attack state. This decision was likely influenced by the threat of legal action, as several users had begun to explore the possibility of filing lawsuits against the exchange and its executives.
