India’s cryptocurrency ecosystem faced an existential reckoning on July 18, 2024, when WazirX, once the nation’s largest digital asset exchange, fell victim to a devastating cyberattack. The breach, attributed to North Korea’s notorious Lazarus Group, wiped out nearly $235 million, representing almost 45% of the exchange’s customer funds. In the aftermath, trading was frozen, users were locked out of their holdings, and a global debate ensued over accountability, digital asset security, and what restitution could look like in decentralized finance. The following breakdown explores WazirX’s recovery efforts, leadership response, legal complications, and future outlook.

The Anatomy of the Hack: A Multi-Signature Breach with Devastating Precision

WazirX’s defense was built around a multi-signature wallet infrastructure—designed to prevent unilateral fund movement. But that very feature became its Achilles’ heel.

The attackers created a counterfeit WazirX account to gain credibility and began draining hot wallets through suspicious trades.

They exploited the multi-signature protocol, which required three WazirX and one Liminal signature, by manipulating transaction metadata, deceiving signers into approving a malicious smart contract.

Once access was granted, funds were moved rapidly through mixers like Tornado Cash, obfuscating the digital trail and making recovery virtually impossible.

The breach demonstrated that even best-practice security architecture could crumble under sophisticated social engineering and software-level exploitation.

Aftershocks and Blame-Shifting: The Fallout Exposes Cracks

The post-hack chaos was as dramatic as the breach itself:

WazirX blamed its wallet custodian, Liminal, accusing the third-party provider of operational failure.

Liminal responded by saying WazirX management controlled all wallet signatures, distancing itself from execution responsibility.

In a surprising twist, WazirX attempted to deflect further accountability onto Binance, claiming operational ties from a 2021 acquisition—claims Binance firmly denied.

With over 4.4 million users stranded, the reputational damage was severe, and public trust in India’s crypto ecosystem took a significant hit.

Legal Shelter and Creditor Relief: Singapore Steps In

Facing insolvency, Zettai PTE Ltd, the parent company of WazirX, approached the Singapore High Court seeking a six-month moratorium. The court granted protection in January 2025, pausing liquidation and allowing a restructuring proposal to be drafted.

The recovery plan, rolled out in phases, outlined:

Immediate payout of 51–57% of user holdings.

Distribution of Recovery Tokens (RT) to represent claims on future revenue, recoveries, or third-party investments.

A goal of recouping up to 80% of lost assets over several years.

The roadmap was built around transparency, creditor engagement, and the hope of regaining momentum via a new decentralized exchange (DEX).

Recovery Tokens: Digital IOUs or Future Value Carriers?

The Recovery Tokens have emerged as the centerpiece—and most controversial element—of WazirX’s restitution architecture.

RTs provide affected users with a stake in future recoveries or profits but offer no guaranteed value or liquidity.

These tokens may eventually be tradable, but critics view them as digital IOUs lacking near-term redemption potential.

WazirX plans to use profits from the upcoming DEX to buy back RTs, providing potential upside if platform activity scales.

Despite the skepticism, over 90% of creditors voted in favor of the recovery plan in April 2025, preferring structured redress over the uncertainty of a drawn-out liquidation.

Legal Barriers and Regulatory Shadows

The hack's legal aftermath has been as layered as the breach itself.

The Supreme Court of India declined to intervene, advising victims to seek relief through regulatory agencies.

Rival exchange CoinSwitch has filed a Rs 81 crore lawsuit against WazirX over frozen corporate assets.

The Indian government’s 70% penalty on undisclosed crypto gains further complicates recovery calculations, especially for RT recipients.

Adding to the maze, WazirX’s tangled ownership relationship with Binance remains unresolved and continues to generate legal and public scrutiny.

Nischal Shetty: At the Center of Crisis and Credibility

WazirX CEO and co-founder Nischal Shetty has played a visible, vocal role in managing the crisis.

He has dismissed accusations of financial mismanagement, characterizing the breach as a sophisticated cyberattack, not a scam.

In public forums, Shetty has promised transparency, committed to a three-year monitored recovery process, and acknowledged the long road ahead.

“We are not absolving ourselves. This is a legally binding scheme monitored by a third party,” Shetty said, reiterating his commitment during a recent media interaction.

Despite facing tough questions, Shetty has remained firm on one point: "There’s an opportunity to rebuild—and even grow beyond the losses."

Where Are the Funds Now?

Of the $234.9 million stolen, only a sliver—approximately $3 million worth of USDT—has been recovered and frozen.

The hackers quickly moved funds into privacy-centric addresses and decentralized mixers.

Cryptocurrency tracing firms and law enforcement agree: the odds of retrieving the majority of the stolen funds are "extremely low."

This reality places greater importance on the success of WazirX’s new business ventures and the long-term viability of RTs.

User Sentiment: A Fragile Balance Between Hope and Frustration

The community reaction has been deeply polarized:

Many users see the RTs as a poor substitute for actual funds, fearing that the promised recovery may never fully materialize.

Others have applauded the structured, court-supervised approach, noting it as a precedent for how exchanges might manage catastrophic breaches in the future.

Concerns remain about the "socialization of losses," where even unaffected users bear partial fallout due to broader ecosystem risk.

Nonetheless, WazirX has publicly posted account snapshots and a dispute portal, seeking to rebuild trust through transparency.

What Lies Ahead: Key Milestones and Market Implications

Bottomline: A Pivotal Moment for India’s Crypto Industry

WazirX’s breach remains a watershed moment for India’s digital asset ecosystem. It revealed not only the technical fragility of even the most advanced platforms, but also the legal, operational, and reputational complexities that follow.

The recovery plan, with its innovative but uncertain token-based restitution system, offers a roadmap that balances realism with optimism. But success will ultimately be measured not in court approvals or token issuance—but in user confidence, operational rebirth, and market re-entry.

If WazirX can navigate this labyrinth and restore value, it may set a template for crisis resilience in crypto finance. If it fails, it risks becoming a cautionary tale etched into blockchain history.

Investors and regulators alike would be wise to follow the next chapter closely.