The cryptocurrency exchange WazirX, once a dominant player in the Indian crypto market, is now facing significant challenges following a major hack and efforts to relocate its operations to Panama.
The Devastating Hack and its Fallout
In July 2024, WazirX suffered a significant cyberattack, allegedly orchestrated by the North Korean Lazarus Group, resulting in the theft of approximately $235 million in cryptocurrency holdings, primarily Ether. This monumental breach represented nearly 45% of WazirX's total reserves, causing panic among users and raising serious concerns about the security of the exchange. Following the incident, WazirX suspended trading and withdrawals, heightening dissatisfaction among its millions of users. Attempting to manage user compensation through its parent company Zettai Pte Ltd, WazirX sought relief in Singaporean courts, but recently, its restructuring plan was rejected.
Legal Labyrinth in India and Singapore
The hack ignited a series of legal actions. Affected users filed a lawsuit against WazirX in India; however, the National Consumer Disputes Redressal Commission (NCDRC) dismissed it, citing lack of legal status for cryptocurrencies. The Singaporean legal proceedings, while initially protective, ultimately became a hurdle to WazirX's recovery plan, with the Singapore High Court's rejection underscoring regulatory scrutiny.
The Panama Pivot: A Strategic Regulatory Escape
In response to rising regulatory pressures, WazirX announced a shift in its operational base, establishing a new entity, Zensui Corporation, in Panama. This move aims to mitigate compliance burdens and continue services in a more favorable regulatory environment. WazirX's filings in Singapore indicated that there are no intentions of registering with India's Financial Intelligence Unit for operations, clarifying compliance obligations are managed by its Indian entity, Zanmai India.
The situation surrounding WazirX highlights significant issues of regulatory uncertainty in cryptocurrency in India and beyond, serving as a crucial lesson about the volatile and unpredictable nature of the crypto market.
