Indian cryptocurrency exchange WazirX has announced a comprehensive plan to address the recent cyberattack that resulted in approximately $230 million in theft.
The breach affected 45% of user funds, prompting the platform to implement a fair and transparent socialized loss strategy for user fund recovery. Drawing lessons from high-profile incidents like the Mt. Gox and Bitfinex hacks, WazirX aims to minimize user disruption and ensure the platform’s stability.
WazirX’s blog post outlined a 55/45 approach to fund recovery. This strategy allows users immediate access to 55% of their assets, while the remaining 45% will be locked in Tether (USDT) equivalent tokens. This method distributes the impact evenly across all users, avoiding disproportionate losses for any group. The platform intends to facilitate a quicker and more flexible resolution compared to traditional recovery methods, which often involve prolonged uncertainty.
In response to the recent cyber attack that led to the theft of $230 million (45% of user funds), we are committed to handling the situation fairly and transparently. We are implementing a socialized loss strategy to distribute the impact equitably among all users.To manage the… pic.twitter.com/uOKvxWuEip
— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 27, 2024
To provide users with manageable options, WazirX has developed two distinct choices for managing their remaining assets. Detailed instructions for these options will be sent to registered users via email. Users must respond by August 3, 2024, at 7:00 AM IST, indicating their preferred course of action.
Asset Management Strategy
WazirX aims at diversifying the remaining 55% assets that are still locked for the users. To minimize the impact on users whose portfolios are full of tokens of the affected projects, this portfolio will comprise a diversified crypto asset. The total value of the unlocked portfolio will be calculated using average price obtained from CoinMarketCap as well as from selected exchanges as on 21st July 2024 at 8:30 P. M IST.
The platform has given a guarantee that in the case where the unlocked portion will contain those affected tokens they will be substituted with healthy ones to balance the equation. WazirX has announced that the service will resume operation as soon as the users have finished voting on the poll to choose an asset management system.
Security Breach and Investigation
The WazirX breach is the second-largest hack of a centralized exchange in recent times, following the DMM exploit on May 31, which resulted in a $305 million loss. Web3 security firm Cyvers has detected multiple suspicious transactions involving WazirX’s Safe Multisig wallet on Ethereum.
According to a post on the platform X, it is believed that $234.9 million of funds in the Safe Multisig wallet have been moved to a new address. Each transaction was funded by Tornado Cash, a decentralized protocol for private transactions.
The transferred funds, originally in Tether (USDT), Pepe (PEPE), and Gala (GALA), have been swapped into Ether. The ongoing investigations will play a crucial role in determining the final asset management strategy.
Communication with Users
As for the recovery step, WazirX will ensure complete transparency, as it has been the case so far. Users will be informed through the WazirX mobile application and web application periodically. Despite explaining that the poll to select the preferred asset management option is non-binding, it has stressed that it will take into account the poll outcome together with ongoing investigations and the platform’s liquidity to make the final decision.
Thus, the exchange has posted the terms on user read and has asked the users to vote in the poll and confirm that they accept the WazirX’s Terms of Use. The policy approach of cooperation with the other users of the credit is aimed at providing equal treatment for all of them during the recovery process.
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