CoinSwitch, a major Indian cryptocurrency exchange, has filed a lawsuit against rival platform WazirX seeking the recovery of trapped funds, revealing the extent of the damage caused by a cyberattack on the platform that led to the theft of $230 million worth of digital assets.
The move comes more than a month after WazirX, one of India's largest cryptocurrency exchanges, reported a security breach and proposed a controversial “socialized loss” strategy aimed at distributing losses across its users.
Exchange aggregator CoinSwitch said WazirX has around 810 million rupees ($9.65 million) worth of assets parked on its platform, including 124 million rupees in fiat currency, 287 million rupees in ERC20 tokens and 399 million rupees in other cryptocurrencies.
“We have attempted to contact WazirX regularly since the day of the incident but have been unable to reach a resolution to recover the funds trapped on the platform,” CoinSwitch said in a detailed thread with X.
The Bengaluru-based startup said the funds trapped in WazirX represent roughly 2% of CoinSwitch's total assets. Less than 1% of the company's assets were affected by the cyberattack, which mainly affected ERC20 tokens.
CoinSwitch, which is backed by investors including a16z, Coinbase and Peak XV, said it is using its own funds to keep user holdings on the platform at a ratio of at least 1:1. The company said its total assets are 1.51 times the user assets invested through the platform.
CoinSwitch said it holds a small amount of liquidity, equivalent to about 7% of its reserves, on third-party exchanges to ensure smooth transactions for users.
The CoinSwitch case highlights the ongoing challenges facing India's cryptocurrency industry, which is beset by regulatory uncertainty and security concerns. The WazirX incident, arguably India's largest cryptocurrency heist, has further eroded confidence in the sector.
WazirX announced plans to resume operations within a week of the attack last month, proposing to return only 55% of customer holdings and lock the remaining 45% in USDT-equivalent tokens.
WazirX founder Nishal Shetty previously acknowledged that the company was not guaranteeing customer funds due to a lack of viable options, and warned that the recovery effort could take years and success was not guaranteed.
Shetty did not immediately respond to a request for comment.