CoinSwitch, a leading cryptocurrency exchange, has initiated legal proceedings against its rival platform, WazirX. The lawsuit is an attempt to recover funds that have been stuck on the WazirX platform, which is run by Nischal Shetty. The announcement was made on August 29, marking a significant escalation in the ongoing dispute between the two crypto exchanges.
The conflict began over a month ago when WazirX, one of the major crypto exchanges operating in India, reported a cyber attack on their platform. The attack allegedly resulted in the theft of a staggering $230 million (Rs 2,000 crore) worth of funds. CoinSwitch, run by Ashish Singhal, claims that a significant portion of its funds are stuck on the WazirX platform due to this incident.
The funds in question include Rs 12.4 crore in Indian rupees, Rs 28.7 crore in ERC20 tokens, and Rs 39.9 crore in other tokens. Cumulatively, these funds represent about 2% of all CoinSwitch funds.
WazirX, however, has claimed that only ERC20 tokens were impacted in the alleged cyber attack, which would translate to less than 1% of total CoinSwitch funds. CoinSwitch has expressed its frustration over the lack of progress in recovering the funds. Despite regular attempts to communicate with WazirX since the day of the incident, CoinSwitch has not been able to reach a solution.
In response to the lawsuit, WazirX announced on Wednesday that it had filed for a moratorium in Singapore's High Court to facilitate restructuring. The application was filed by Zettai Pte Ltd., WazirX's Singapore-based majority stakeholder entity. The restructuring process is expected to take at least six months and, if approved by the creditors and sanctioned by the Singapore Court, would be legally binding on all relevant parties.
CoinSwitch, however, remains undeterred in its pursuit of the stuck funds. Despite the ongoing legal proceedings and the uncertainty surrounding the recovery process, CoinSwitch has reassured its users that their balances are not affected by the exposure to WazirX.
This incident is reminiscent of the infamous Mt. Gox hack in 2014, where the Tokyo-based bitcoin exchange filed for bankruptcy after losing bitcoins worth around $460 million at the time. The Mt. Gox incident led to significant changes in the cryptocurrency market, with exchanges implementing more robust security measures to protect users' funds.
The CoinSwitch-WazirX dispute underscores the risks associated with the burgeoning cryptocurrency market. While the technology offers immense potential for financial innovation, it also presents significant challenges in terms of security and regulation. As the market continues to evolve, it is crucial for exchanges to implement robust security measures and for regulators to provide clear guidelines to protect users' interests.
The legal battle between CoinSwitch and WazirX marks a significant development in the Indian cryptocurrency market. The outcome of the lawsuit could have far-reaching implications for the market, potentially influencing how disputes of this nature are handled in the future. As the situation unfolds, all eyes will be on the Singapore High Court's decision and its impact on the two exchanges and their users. The CoinSwitch-WazirX dispute serves as a stark reminder of the risks inherent in the cryptocurrency market and the importance of robust security measures and clear regulatory guidelines.
