WazirX Denies Fund Misuse, Cites Custodian Onboarding Delays
Indian cryptocurrency exchange WazirX has responded to accusations from Ashish Singhal, co-founder of CoinSwitch, who raised concerns about the transfer of over $73 million in cryptocurrencies to exchanges like Bybit and KuCoin. Singhal’s remarks have sparked questions about WazirX’s financial stability and handling of user funds. However, WazirX’s co-founder, Nischal Shetty, dismissed these claims as a “false narrative” and part of a “coordinated campaign.”
Shetty clarified that WazirX had been transparent by disclosing its wallet addresses, and the ongoing proof of reserves (POR) process would provide further transparency on all transactions. He explained that the transfers to external exchanges were due to the platform’s ongoing process of onboarding a custodian, which is necessary because custodians currently offer limited support for all tokens. Despite the delays, Shetty emphasized that WazirX is carefully evaluating its custody options and continues to use third-party exchanges for storing some assets until a custodian is finalized.
WazirX’s Legal and Security Challenges:
The exchange has been dealing with the repercussions of a significant security breach in July 2024, which resulted in the loss of approximately $230 million in digital assets—nearly 45% of WazirX’s holdings. The incident has left the company with liabilities totaling $546 million. In response, WazirX has disclosed over 240,000 wallet addresses as part of its efforts to maintain transparency.
After the hack, the Singapore High Court granted WazirX a four-month moratorium in September, allowing the exchange time to manage its liabilities. The company plans to form a 10-member creditors’ committee by October 9. Additionally, Indian authorities, including the Financial Intelligence Unit (FIU) and CERT-In, have initiated investigations into illegal fund transfers, questioning WazirX executives as part of the inquiry.
Amid rising legal tensions, CoinSwitch has announced its intention to recover INR 12.4 crore (approximately $1.5 million) in cash and cryptocurrencies deposited on WazirX’s platform.
