Singapore-based Zettai, the holding company of cryptocurrency exchange platform WazirX, has filed an application with the Singapore High Court for a moratorium under section 64 of the Insolvency, Restructuring and Dissolution Act 2018. This is to facilitate the company's intention to restructure its liabilities under a scheme of arrangement. Crypto exchange WazirX on Wednesday informed in a blog post that this step has been taken to address users' cryptocurrency balances on the platform following the cyberattack and theft of crypto tokens from the platform.
A cyberattack on WazirX led to the theft of about Rs 2,000 crore worth of funds.
"A moratorium provides breathing space while Zettai progresses with a restructuring, which represents the most efficient way to address users’ cryptocurrency balances on the Platform and facilitate recovery for users," it said.
An automatic moratorium of 30 days arises from the filing of the application (27 August 2024), and the Singapore Court will determine whether to grant the moratorium sought at a hearing of the application.
Under a planned restructuring, the impact from the cyberattack will be allocated pro-rata across users who rank equally with each other as unsecured creditors, and users will receive a share of available token assets associated with the Platform proportionate to their share of all users’ unsecured claims for their account balances, it explained.
Meanwhile, WazirX co-founder and CEO Nischal Shetty, who has been silent until now, in a note on X said that he has been struggling to find the right words. "The pain and stress of this attack have been overwhelming. It’s something no one has faced before. The hardship it’s caused to our community, to our people, is beyond anything I could have imagined. My heart aches for every single one of you."
"But we will get through this together. We’ve taken the first steps, but there’s still more to be done. Now, more than ever, we need to unite and find a solution that serves the best interests of everyone on the platform," he added.
About withdrawals, the exchange said Zettai is pursuing a restructuring under a Singapore Scheme of Arrangement. Once the restructuring proposal and Scheme is approved by creditors and sanctioned by the High Court of Singapore, Zettai will be able to re-open cryptocurrency withdrawals in line with the terms of the Scheme.
A Scheme is expected to take at least 6 months and is the fastest route to allowing the reopening of cryptocurrency withdrawals, it said.
CoinSwitch sues WazirX
CoinSwitch, which has Rs 12.4 crore in INR, Rs 28.7 crore in ERC20 tokens, and Rs 39.9 crore in other tokens on WazirX, will pursue legal action to recover the funds. This amounts to about 2% of all funds of CoinSwitch.
"From the day of the incident, we have tried to be in constant touch with the WazirX team, seeking recovery of the funds that are stuck on their exchange. However, our efforts have not come to fruition," CoinSwitch said.
According to the WazirX claim, only ERC20 tokens were impacted in the alleged cyber attack. That translates to less than 1 % of total CoinSwitch funds.
As an exchange aggregator, CoinSwitch maintains a small amount of liquidity on third-party crypto exchanges (7%), and this is "to ensure seamless trading for our users."
After the cyberattack, it utilised funds from its own treasury to maintain the ratio.
"We are able to do this because of the financial strength of our company and robust governance practices. CoinSwitch has raised about Rs 2500 crores from marquee global investors such as Andreessen Horowitz (a16z), Tiger Global, Coinbase Ventures, Sequoia Capital India, Ribbit Capital, and Paradigm," it said.