WazirX, once one of the largest Indian crypto exchanges, has come up with two possible schemes to restore stolen currency to its former users.
The creditors will vote on the two options, and the process will proceed according to the vote.
Once the creditors choose how they want their payments to be handled, they will get their assets back by 2030, with a start date in April 2025, according to experts familiar with the process.
What Does the Scheme Involve?
The scheme that will be put to the vote allows the crypto trading exchange to continue its operations as a decentralized exchange, as well as to issue a recovery token that can be traded as any other crypto coin. They would also be obligated to perform a periodic buyback of these tokens.
The payouts from such a scheme will start right away – ten days after the exchange is back online. However, it also carries risks that come with trading crypto tokens, which is an argument against accepting the offer. The creditor will have to choose whether the risks are worth a better offer than the one that comes with bankruptcy.
Alternative Refund Scheme
If the creditors reject the proposed scheme, the alternative is set up by the Singapore laws, which apply to crypto exchanges and any other business filing for bankruptcy. It will require the company to liquidate its assets and use the funds to pay out the creditors who have lost their cryptocurrencies due to hacking.
It’s a worse option for creditors because there’ll be delays, and the payouts may not cover the entire loss. However, it’s more certain than engaging in more trading with the coins created by the exchange.
How will the Decision be made?
Creditors of the hacked crypto exchange will vote to accept the proposal or to reject it and wait for the bankruptcy process. These options were created by the Singapore court and presented by the company to the credit. According to the court’s decision, 75 percent of the creditors need to approve the scheme.
This doesn’t, however, mean that the small creditors will be able to outvote the big ones. It refers to those who hold 75 percent of the value involved in the lawsuit and not the individual owners. The wording can create a rift between the creditors as those with larger stakes may be more willing to risk accepting the scheme.
What Happened With WazirX?
WazirX was the largest crypto exchange in India, measured by volume of trading, and it was hacked in January of 2024. Korean hackers stole over $230 of assets kept in the exchange, which led to lawsuits and damaged the company’s reputation, as well as the overall trust in cryptocurrencies.
WazirX filed for a moratorium on its debt to a court in Singapore, where it’s based. This led to the arrangement that the court approved, which is now to be put to a vote.
Security Concerns
The hack was a trigger event for many crypto investors who found the security breach to be disturbing. Most investors believe that the best decentralized exchanges have the most sophisticated security features. After WazirX was hacked, competitors put their security features in front and center.
Many exchanges have also put an emphasis on educating their users and their staff on how to avoid and prevent hacking attempts. These events didn’t shake the overall interest in cryptos in India, but they did somewhat change the industry.
What Will the Creditors Choose?
There is no insider information on which way the investors will go. The two options are in stark contrast. The riskier one will allow the creditors to get a portion of their payments as soon as April, but the safer one will have them wait for their assets until 2030.
The bigger question at stake is how they plan to treat the exchange itself from now on. The riskier option will also allow the exchange to keep operating after it loses its funds. If they choose a payout scheme, it will testify to their trust in the exchange and cryptos in general.
To Sum Up
WazirX, an Indian crypto exchange that has lost its users’ funds to hacking, has come up with a scheme to refund them. It proposes that the exchange will create a coin used to refund the losses and continue to operate and allow trading. There are risks involved with trading, but the payouts should start in April this year.
It’s up to the users who have lost their funds to choose between these options and going through regular bankruptcy. It takes 75 percent of the users to make a call that will oblige the exchange.