WazirX CEO clarifies about misappropriation of funds and future plans

Main highlights:

• WazirX CEO Nischal Shetty gave his first interview since the hack.
• WazirX users received 85% of the portfolio value calculated based on the value on the rebalancing date.
• A cost fund was created from the remaining exchange assets. Legal and administrative costs were met from the expense fund.

WazirX, a famous Indian cryptocurrency exchange, suffered a $234 million hack in July 2024, shocking the Indian cryptocurrency community. Although the exchange maintained internal transparency through its announcement regarding X, the CEO and management team did not appear publicly to directly answer any questions.

Many users were worried about the recovery of funds and the stability of operations, and the community became anxious. Furthermore, the comments section on the exchange’s social media platform X was disabled, limiting open discussion, which increased anxiety among users.

For the first time since the hack, WazirX CEO Nischal Shetty came forward and answered important questions about the recovery process in an interview with Switch, an Indian podcast channel owned by Zee Production. In the interview, Shetty also discussed discrepancies in payments, the use of funds for operating and legal costs, and future asset protection.

How much refund did WazirX users receive?

During the interview, the host asked Shetty why users were not fully refunded, keeping in mind the rising price of the tokens. It has increased since the hack. The implication is that the loss was supposed to be recovered through market appreciation, so why hasn’t the user been fully repaid yet?

The CEO responded that approximately $234 million was stolen during the hack, and the price of the remaining tokens increased. There was an outcry from users asking to freeze their portfolios to avoid missing out on profits. Therefore, the rebalance was performed on January 17, 2025. In the rebalancing scheme, it was decided that the exchange would pay out 85% of the value of users’ portfolios, with the remaining 15% being returned over the next 2-3 years.

The interviewer then went on to ask that many users are receiving almost 20-30% of the tokens they were promised instead of 85% and what is the reason behind this deficit. To this, the CEO replied that according to the relocation scheme, this 85% is not calculated by the number of tokens held by the user, but by the total value of the user’s portfolio on the rebalancing date (January 17, 2025).

Between the rebalance date and the payout date, the price of cryptocurrencies fluctuated up and down. Some tokens lost value because users received fewer tokens than expected. The number of tokens fluctuated as other tokens proliferated. As the price of the token increased after the rebalance, some users were able to profit, gained more value and became quieter. The losers complained when the tokens fell. The plan provided for 85% of the portfolio value, but the amount varied due to price fluctuations.

Shetty cleared of suspicion of embezzlement of user funds

In the interview, Nischal was asked whether some of the user funds were used for the legal battle in Singapore where this restructuring plan was brought. Mr. Nischal very calmly explained where the cost fund was created. According to his statement, the fund was created from funds remaining in the exchange’s wallet after the hack. He further disclosed that the money was used for operational and legal costs related to the recovery and restructuring plan. Shetty further added that the deposits were never used for the benefit of the company. All disbursements were made following clear channels to maintain the exchange’s operations while ensuring users’ ability to withdraw.

He emphasized that the cost fund is not a misuse of funds, but a necessary measure to keep the exchange operating. He said: “If we had not done this, trading would have stopped completely and the recovery and withdrawal process would have been delayed.” He further assured users that customer funds will continue to be kept as segregated as possible given the post-hack situation.

Future prospects

The remaining 15% of user funds in WazirX’s turnaround plan will be returned in stages over the next two to three years. This phased approach was chosen to allow WazirX to recover the maximum value of its user portfolio. Additionally, there is no cap at 15% in this interview, so users could receive even more if WazirX recovers more value than expected. The plan was approved by the court and was designed to be faster and less disruptive than liquidating the company.

WazirX has also partnered with BitGo to secure user funds with institutional-grade custody including multi-signature wallets and insurance coverage. The move also supports transparent distribution of funds as part of WazirX’s post-hack recovery plan.

Also read: WazirX begins rolling out tiered trading with no fees for 30 days