The Indian digital currency exchange WazirX made waves this past Saturday with its announcement to distribute the $230 million in losses incurred from a recent security incident across its user base, sparking considerable debate within the cryptocurrency sector in India.
The Mumbai-based exchange, which ceased all trading actions the previous week due to a severe cyber-attack that siphoned off almost half its funds, has devised a roadmap to get back up and running within the next weeks. This includes executing a “fair and transparent socialized loss framework,” aiming to spread the financial hit more evenly among its clientele.
Plans by WazirX to “adjust” the assets held in customer portfolios mean that clients will only receive 55% of their holdings, with the other 45% being secured in USDT-equivalent assets. This policy extends to all customers, even if their holdings were not directly compromised by the security breach, clarifying that “customers who have 100% of their assets in the ‘non-stolen’ category will have only 55% of that returned to them.”
The said breach led to the unauthorized removal of over 200 distinct cryptocurrencies, with major losses in tokens like Shiba Inu (SHIB), Ethereum, Polygon’s MATIC, and the Pepe meme cryptocurrency, as evidenced by the blockchain analytics conducted through third-party explorer Lookchain.
The infiltrative event on July 18 was initiated by an exploit linked to discrepancies between what was shown via multisignature wallet provider Liminal’s platform and the actual transaction data, WazirX has disclosed.
The exchange is presenting clients with two pathways forward: Option A, which allows account holders to engage in trading and to hold their crypto assets with precedence in restoration attempts but inhibits withdrawals, and Option B, which lifts trading and withdrawal limitations but reduces their prioritization in the recovery sequence. Conditions apply when toggling between the two choices.
As per WazirX, “Option B grants the freedom to trade and withdraw your assets, yet prioritization for recovery will be reserved for those who selected Option A initially. Switching to Option A is permitted before any trading or withdrawal activities are conducted,” the company elaborated.
During a one-directional community session on Friday evening, WazirX founder Nishal Shetty confirmed that the company did not insure user funds as such alternatives were deemed impractical. He underscored that any recovery undertaking might be unsuccessful and potentially take an extended duration to yield results.
“WazirX is evidently maneuvering control over the crypto assets that lie in user accounts. This signifies that the company’s role surpasses that of a mere gateway and custodian, as it actively transfers crypto from personal wallets to others, undermining its claim as a pure exchange,” commented Nikhil Pahwa, a prominent policy advocate and editor at MediaNama.
A significant portion of WazirX clientele also queried the company on Saturday about its decision not to utilize its own revenue reserves to either fully or partially compensate affected users for their losses.
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- Source: https://cryptoinfonet.com/crypto-trading/wazirx-to-distribute-230-million-security-breach-loss-among-users/
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