WazirX creditors to decide on recovery plan or risk lengthy liquidation

WazirX's phased compensation plan seeks to deliver up to 80% recovery despite skepticism and regulatory complexities.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

WazirX creditors will decide in the coming weeks whether to begin receiving compensation for their lost crypto as early as April 2025 or face a prolonged recovery process that could extend to 2030.

The vote follows a Singapore High Court ruling allowing the embattled Indian exchange to pursue a restructuring plan rather than face liquidation. The decision hinges on whether three-quarters of creditors approve the recovery scheme.

If the threshold is met, WazirX will roll out a phased compensation plan, including launching a decentralized exchange (DEX), issuing recovery tokens, and implementing periodic buybacks to reimburse affected users.

If the vote fails, the platform will be forced into liquidation, a process the company has warned could take years with diminished returns for creditors.

Divisive Proposal

WazirX’s proposed recovery plan has sparked controversy despite the company’s claims that creditors could recover up to 80% of their balances through its new DEX and recovery token model.

Many users remain skeptical, with some critics arguing that the five-year delay is a strategic maneuver to coerce creditors into accepting the new platform rather than a genuine recovery effort.

Others have directed their frustration at WazirX co-founder Nischal Shetty, alleging that he continues to exert undue influence over the process. The company’s past communication failures and its inability to recover stolen funds have only fueled distrust among investors.

Adding to the uncertainty, India’s government recently imposed a 70% penalty on undisclosed crypto gains. This move could have significant tax implications for WazirX users receiving recovery tokens, further complicating the decision-making process.

With voting set to take place in the coming weeks, WazirX creditors face a difficult choice: accept the restructuring plan and wait for potential recovery or risk liquidation, which could take years with lower payouts.

For WazirX, the outcome of the vote will determine whether it can rebuild or fade into insolvency.

Fallout

WazirX, once India’s largest crypto exchange by trading volume, was thrown into turmoil in July 2024 when hackers linked to North Korea’s Lazarus Group infiltrated its systems and drained over $230 million in user funds.

The attackers laundered the stolen assets through crypto-mixing services designed to obscure transaction trails, leaving the platform with little hope of retrieving the funds.

The hack exacerbated WazirX’s already precarious situation involving regulatory investigations. Indian regulators have been scrutinizing the exchange since 2022 when the Enforcement Directorate froze its bank accounts as part of an anti-money laundering investigation.

Though the accounts were later unfrozen, the company struggled to rebuild trust. Meanwhile, the Delhi High Court ordered a new investigation into the exchange following the hack.

To deal with the fallout, WazirX proposed a restructuring plan to avoid outright collapse. The company sought legal protection in Singapore, where its parent entity is licensed. The Singapore High Court ruled in favor of restructuring last month, granting WazirX a path to survival — if creditors agree.

Mentioned in this article