CoinSwitch sues WazirX over $230M theft amid crypto sector woes

CoinSwitch, a leading cryptocurrency exchange in India, has filed a lawsuit against rival platform WazirX, seeking to recover funds trapped following a massive cyberattack that saw $230 million in digital assets stolen from WazirX.

The lawsuit comes over a month after WazirX reported the breach and introduced a contentious “socialized loss” strategy to distribute the financial impact among its user base.

CoinSwitch, which aggregates various exchanges, revealed that it has approximately ₹810 million ($9.65 million) in assets stuck on WazirX’s platform. This includes ₹124 million in fiat currency, ₹287 million in ERC20 tokens, and ₹399 million in other cryptocurrencies.

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In a detailed update on X, CoinSwitch stated that despite multiple attempts to resolve the issue with WazirX, no solution has been reached for recovering the trapped funds.

WazirX responded by filing for a moratorium in Singapore’s High Court to facilitate its restructuring process. The exchange plans to implement a scheme of arrangement, which involves proportionally distributing available assets among users as unsecured creditors. WazirX estimates that this process will take at least six months while it seeks ways to recover additional tokens.

CoinSwitch noted that the affected funds represent about 2% of its total assets, with less than 1% of its assets impacted by the cyberattack, which primarily targeted ERC20 tokens.

Supported by investors such as a16z, Coinbase, and Peak XV, CoinSwitch is using its own treasury to ensure it maintains a 1:1 ratio for users’ holdings and has assets totaling 1.51 times the user investments on its platform. The company also retains about 7% of its liquidity on third-party exchanges to facilitate smooth trading operations.

The lawsuit underscores the difficulties facing India’s cryptocurrency industry, already troubled by regulatory uncertainties and security concerns. The WazirX incident, described as the largest crypto heist in India, has further diminished confidence in the sector.

In response to the attack, WazirX had previously stated plans to resume operations and return only 55% of customer holdings, with the remaining 45% locked in USDT-equivalent tokens.

WazirX founder Nischal Shetty had earlier admitted the lack of viable insurance options for customer funds and warned that recovery could take years.