Crypto exchange WazirX has received tremendous criticism for its proposed “55/45” plan to socialize losses made from a recent attack on the platform.
On July 27, WazirX started a poll to gauge public sentiment for a plan to get the exchange back up and running after the hack that saw it lose millions of dollars in crypto. The plan was aimed at distributing the losses, amounting to $230 million, among every user.
However, due to the uproar from its customers, the crypto trading platform has reportedly chosen to abandon the plan.
According to the exchange’s blog, the proposal was to limit users to spending 55% of their assets on the platform as it converts the remaining 45% into stablecoin reserves.
WazirX co-founder: ‘This is a major cyber attack’
Following backlash from the community, WazirX co-founder Nischal Shetty hastily clarified that the poll was not legally binding. He said it was meant to collect community feedback, a statement that has seemingly not cooled down the ire of the exchange’s user base.
1. This poll is a preliminary step to understand your opinions.2. This poll is not legally binding upon the users or WazirX3. We will soon launch feedback form to collect more ideas 4. We are now looking into next steps based on all the feedback receivedThis is a major… https://t.co/tcdDjWzIYI
— Nischal (Shardeum) 🔼 (@NischalShetty) July 29, 2024
“This is a major cyberattack and we need more time to work on resolution. Your support and feedback will help us navigate this effectively,” Shetty added. “We are committed to transparency and will continue to update you as we refine our approach based on your suggestions.”
Some of the platform’s users have raised a flurry of concerns about how the exchange is working to reimburse the victims of the recent hack as illustrated in the X post below.
#wazirxhow long it will take u to just tell ur users ur exact reserves left? Which token how much stolen? And why are u not starting withdrawals? Everytime buying time is not fair actually. It doesnt take this time.#wazirxhack pic.twitter.com/XEdr2vCJS7
— सच्च तक (@TakaSacca19744) August 3, 2024
Others have even complained that the exchange is selectively answering questions and avoiding the most pertinent issues.
Wazirx team, What is this behavior https://t.co/0Lwqeqrbcq pic.twitter.com/RpLlKswCi2
— Neel (Crypto Jargon) (@Crypto_Jargon) August 3, 2024
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Crypto security firms and sleuths have come forward with explanations on how the hack possibly happened, including X analyst @BoringSleuth, popularly known as TruthLabs. TruthLabs had previously raised several concerns about WazirX’s operations days before the exploit.
They had issued a warning regarding a security vulnerability affecting multiple layer 2 blockchains, including Blast, Optimism, Mantle, and Coinbase’s Base.
According to TruthLabs, the platforms use similar multi-signature contracts to WazirX, and that may have jeopardized billions of dollars in user funds.
A 🧵showing @WazirXIndia's own misleading actions and security lapses which most likely led to their Customers loosing over $230M in assets 👇🫡1/18 🧵 pic.twitter.com/Yw021PPPk0
— TruthLabs 🫡 (@BoringSleuth) August 1, 2024
Their analysis highlighted that WazirX’s deployer address had only transferred funds to three destinations: a Binance wallet, a burn address, and a SwipeX contract — all allegedly linked to laundering stolen funds.
The Indian cryptocurrency exchange denies all the accusations of security lapses by TruthLabs that allegedly led to the hack. Instead, it insisted that it has consistently employed multiple key holders.
Binance bears blame?
The security analyst also opined that it’s highly likely WazirX’s main exchange address, established in 2022, originated from a Binance address previously connected to fraud and theft.
The sleuth implied that the two companies, WazirX and Binance, might not have fully severed their ties as they had previously claimed.
In 2019, Binance published a press release saying it “acquired India’s leading digital asset platform WazirX.” It later redacted the statement, clarifying that it was an agreement to purchase “certain assets and intellectual property” of WazirX.
“Binance is by far the largest crypto exchange in the world. Whatever happens to it has a systemic impact on the crypto space,” the company said in 2023.
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