The troubled Indian crypto exchange WazirX’s founders recently faced questions from government officials regarding the illegal transfer of cryptocurrencies from its wallets. The investigation, reported by local Indian news outlet Moneycontrol, involved executives from the Financial Intelligence Unit (FIU), Intelligence Bureau (IB), and the Indian Computer Emergency Response Team (CERT-In visiting WazirX’s Mumbai office. They discussed ways to determine how tokens worth $235 million were moved to hackers, including the possibility of an inside job, although no foul play has been detected yet. WazirX shared transaction details, hacker-linked blockchain addresses, and server logs with the officials, without any personal assets being confiscated.
In response to the hack, the FIU has contacted other crypto industry stakeholders to gather information about suspected financial transactions. The Intelligence Bureau is reviewing security and counterintelligence aspects of the major hack, while CERT-In, specializing in cybersecurity threats, is examining the technical side of the WazirX breach. The government’s concern stems from the impact of such a large illegal transfer on retail investors, particularly in the absence of clear regulations in the industry. The agencies are seeking data to understand the structure, transfer processes, liquidity, and other aspects of the hack.
WazirX, a prominent Indian crypto exchange, experienced a significant security breach on July 18, resulting in the theft of $234 million from its Ethereum wallet, representing approximately 45% of its assets. In light of the hack and the funds lost, WazirX’s parent company, Zettai, is engaging with 11 crypto exchanges and trading firms to secure emergency funding for the exchange. Additionally, on October 4, WazirX announced the formation of a Committee of Creditors (COC) as part of the restructuring process for Zettai Pte Ltd. The COC will represent creditors’ interests, provide feedback, and monitor progress in the proposed restructuring of the company.
The government’s investigation into the WazirX hack comes at a time when the crypto industry in India is facing increased scrutiny and regulatory challenges. With the lack of clear regulations governing cryptocurrencies, incidents like the WazirX hack raise concerns about investor protection and financial stability in the sector. The agencies involved in the investigation, including the FIU, Intelligence Bureau, and CERT-In, are assessing the security vulnerabilities and potential risks associated with the exchange hack, as well as seeking information from other industry stakeholders to better understand the transfer processes and liquidity in the crypto space.
The response from government agencies and regulators following the WazirX hack highlights the importance of establishing clear guidelines and regulations for the crypto industry in India. By engaging with key stakeholders, such as crypto exchanges and trading firms, the authorities aim to enhance security measures and mitigate future risks of similar breaches. The formation of the Committee of Creditors by WazirX as part of the restructuring process demonstrates a commitment to addressing the fallout from the security breach and safeguarding the interests of creditors and investors in the exchange.
As the investigation into the WazirX hack progresses and the exchange undergoes restructuring, the future regulatory landscape for crypto exchanges in India remains uncertain. The outcome of the government’s inquiry, along with the measures taken by WazirX and other industry players, will likely shape the direction of crypto regulations and security standards in the country. In the midst of these challenges, the crypto industry in India must navigate regulatory complexities and work towards establishing a secure and transparent ecosystem for investors and stakeholders.
