Indian cryptocurrency exchange WazirX made headlines over the weekend with their controversial decision to distribute the $230 million loss from a recent security breach among all its customers. This move has caused quite a stir within the local crypto community.
The Mumbai-based exchange, which halted trading activities following the cyber attack that compromised a significant portion of its reserves, has detailed a plan to resume operations within a week. They aim to implement a fair and transparent “socialized loss strategy” to distribute the impact evenly among users.
Under this strategy, WazirX plans to rebalance customer portfolios by returning 55% of their holdings while locking the remaining 45% in USDT-equivalent tokens. This will affect all users, even those whose tokens were not directly impacted by the breach.
The security breach resulted in the theft of over 200 different cryptocurrencies, with popular tokens like Shiba Inu, Ethereum, MATIC, and Pepe being the most affected, according to blockchain data analysis.
WazirX is giving users two options going forward: Option A prioritizes recovery efforts but restricts withdrawals, while Option B allows trading and withdrawals but places users at a lower priority. Users can switch between these options with certain conditions.
Addressing the community, WazirX founder Nishal Shetty explained that the firm couldn’t insure customer funds due to viability issues. He emphasized that recovery efforts may take time and could be uncertain.
Nikhil Pahwa, a prominent policy voice, criticized WazirX’s actions, stating that by controlling users’ assets, the exchange is not just acting as an intermediary but is directly accessing user wallets.
Many customers questioned why WazirX is not using its profit reserves to compensate users or minimize the damage caused by the security breach.
