WazirX Moratorium Explained: What Investors Need to Know

The $230 million cyber attack happened on July 18, leaving the crypto industry shaken to the core.

More than a month is over now, but the road to recovery looks far from over.

In this whole fiasco, WazirX and Liminal Custody were the major players apart from the hackers. Basically, a cyber attack happened on one of WazirX’s multisig wallets, which was managed by Liminal Custody, a renowned crypto wallet custody provider.

Apart from the blame game between both companies, WazirX has taken some major steps to recover the stolen assets and regain users’ trust. Some of the notable steps include:

• reaching out to over 500 crypto exchanges to block transactions from the hacker's wallet,
• filing an FIR, and working closely with LEAs to track down the cybercriminals,
• launching a bounty program by offering a 10% reward on recovered assets,
• restoring all user account balances to their status as of July 18, 2024, at 1 PM IST,
• collaborating with a renowned cybersecurity firm for a detailed forensic analysis (and receiving a green signal on systems remaining uncompromised),
• making major announcements related to crypto next steps and INR withdrawals:

- For crypto withdrawals, WazirX plans to pursue a Singapore Scheme of Arrangement—a legal process designed to distribute assets equitably and ensure user approval through voting, and

- For INR withdrawals, it has started withdrawals in phases where users can withdraw upto 66%.

Adding to the mix, on August 27, WazirX announced a strategic move that had the entire crypto community buzzing with curiosity.

And here’s something that really shows where their priorities lie: WazirX is planning to hold ‘Townhall Meetings’ to directly address all those burning questions and concerns from their community.

So, What Has Happened?

On August 27, WazirX announced Zettai Pte Ltd. filed a moratorium application in Singapore’s High Court, a move that could impact the stakeholders of this cyber attack. But what exactly does this mean for the investors?

The moratorium isn’t just a legal formality; it’s a strategic pause.

It will give Zettai the breathing space it needs to craft a restructuring plan without the looming threat of creditors taking action. But how does this affect you, the investor?

The Moratorium: A Legal Shield

Think of the moratorium as a protective shield. It temporarily halts any legal actions by creditors against the company while it works on a solution to the crisis. For investors, this means that, for the time being, crypto withdrawals will be on hold. This might seem frustrating, but it could be the quickest path to recovering your assets.

Why? In the case of Zettai, the moratorium allows it to propose a Scheme of Arrangement, a structured plan that aims to distribute available assets fairly among users. This isn’t just about taking a pause—it’s about creating a pathway to recovery that could benefit everyone involved. But how long will this take, and is it truly the best approach?

The Scheme of Arrangement: A Path to Recovery

The proposed Scheme of Arrangement is more than just a plan—it’s a kind of lifeline for investors.

Under this Scheme, users, now considered unsecured creditors, will receive their share of the recovered assets based on their account balances. But Zettai isn’t stopping there. To boost recovery efforts, they’re also exploring additional mechanisms, like tracing the stolen tokens and developing revenue-generating products.

The ERC-20 Token Challenge

One question on everyone’s mind is why Zettai can’t simply reopen crypto withdrawals.

The answer lies in the complexity of the situation. The cyberattack primarily targeted ERC-20 tokens, throwing the platform’s crypto assets out of balance. While non-ERC-20 tokens remain under control, the disparity makes an immediate reopening of withdrawals impractical.

The Scheme offers a structured approach to addressing this imbalance, but the question arises: Will users be patient enough to wait?

The Waiting Game

The restructuring process under the moratorium is expected to take at least six months, if not longer. Zettai has emphasized that this is the most efficient and cost-effective way forward, but it’s not without its challenges. The ongoing dispute between Zettai and Binance adds another layer of complexity, though details on this remain under wraps due to confidentiality obligations.

Transparency and Trust

WazirX is moving forward with plans to keep users informed, including several townhall meetings to address questions and provide further clarity.

The Road Ahead

The moratorium may not be the outcome investors were hoping for, but it could be the best option on the table.

As the process unfolds, the real question is whether users are willing to support this approach, even if it means waiting longer than anticipated. Will WazirX turn this crisis around, or will frustration lead to further complications? Only time will tell.