WazirX, a cryptocurrency exchange under the parent company Zettai Pte Ltd, recently applied for a moratorium under Section 64 of the Insolvency, Restructuring and Dissolution Act 2018 in the Singapore High Court. This legal move was prompted by a major cyber attack on July 18, 2024, which resulted in the theft of approximately $230 million worth of cryptocurrency assets. The moratorium is a temporary suspension of activity or law that allows the company to restructure its liabilities through a scheme of arrangement. This 30-day moratorium will give the court time to consider the request and determine its duration.
Following the cyber attack, WazirX suspended all withdrawals to prevent further losses. This decision, while necessary for security reasons, caused frustration among the platform’s users. The moratorium sought by Zettai Pte Ltd aims to provide the company with breathing space to engage in complex restructuring efforts. It will shield the company from creditor enforcement actions such as winding-up proceedings and security enforcement. The company plans to allocate the impact of the cyber attack pro-rata among users, meaning they will receive a share of available token assets proportionate to their account balances.
The restructuring plan proposed by WazirX classifies users as unsecured creditors with claims for the value of their token balances. However, users have expressed disagreement with the initial proposal, which would have redistributed losses among affected and unaffected wallets on the platform. This would have resulted in a significant 45% cut to customer wallets, even for those whose tokens were not directly affected by the cyber breach. In response to the situation, rival exchange CoinSwitch has filed a lawsuit against WazirX over funds stuck on the platform following the cyber attack.
CoinSwitch claims to have approximately $9.7 million worth of assets on WazirX, including funds in various tokens. Despite efforts to retrieve the funds, CoinSwitch has been unable to reach a satisfactory solution with WazirX. To address concerns and facilitate communication, WazirX and its advisors have announced plans to hold a town hall via video conference in the coming weeks. Additionally, WazirX has acknowledged an ongoing dispute with Binance, which may further complicate the restructuring process. This situation highlights the challenges faced by cryptocurrency exchanges in ensuring the security and integrity of user funds amid increasing cyber threats.
In conclusion, the application for a moratorium by WazirX in the Singapore High Court is a strategic move to facilitate the company’s restructuring efforts following a major cyber attack. This legal maneuver provides the company with essential breathing space to address its liabilities and protect it from creditor enforcement actions. However, the proposed restructuring plan has faced opposition from users and led to a lawsuit from a rival exchange, highlighting the complexity of the situation. Clear communication and transparency will be key in navigating these challenges and rebuilding trust with users and stakeholders.
