After a long, frustrating wait of 50 days following the WazirX hack of Rs 2000 crores, a group of lawyers, representing 1.5 crore Indian users of the cryptocurrency exchange, has written a letter to the Chief Justice of India (CJI), urging his intervention in the case.Lawyers Seek Chief Justice of India’s intervention in WazirX hack
The letter addressed by the group of lawyers to Indian CJI D.Y Chandrachud, accuses Nischal Shetty, co-founder of WazirX, and his team of orchestrating the alleged robbery of Rs 5000 crores in virtual assets through fraudulent means. The complaint demands a criminal investigation under several provisions of the Bharatiya Nyaya Sanhita Act 2023, PMLA Act 2002, and IT Act 2008.
On July 18, WazirX experienced a massive cyber attack that resulted in the loss of 45% of user funds in the form of cryptocurrencies worth $234 Million (Rs 2000 crores). The exchange is handled by parent company Zettai Pte Ltd, which has approached Singapore High Court to seek relief from any legal action against the company by users. Moreover, WazirX co-founder Nischal Shetty had shifted to Dubai from India two years ago even as over 90% users of the exchange belong to India.
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With no recourse in sight, the victim users of WazirX have tried to approach the Indian judiciary to take suo moto cognizance in the case and direct investigative agencies to probe the hack and accusations of alleged malpractices against the management including co-founder Nischal Shetty.
Accusations Against Nischal Shetty
The letter accuses Nischal Shetty, the founder of WazirX, along with his associates, of masterminding a meticulously planned digital heist.
The letter alleges that the exchange’s team knowingly allowed 45% of users’ virtual assets, amounting to Rs 5000 crores, to be looted through one of their multi-signature non-custodial cold wallets. The contents of the letter question how only one cold wallet was breached and why other wallets remained untouched, pointing to a possible insider job.
Claims of Mismanagement and Delay in Action
The letter raises serious concerns over the delayed response from WazirX in registering an FIR. Despite the hack being reported on 18th July 2024, it took the team until 5th August 2024 to file a formal complaint under the Bharatiya Nyaya Sanhita and IT Act. This delay, coupled with the hasty conclusion that North Korean hackers were involved, has led to widespread skepticism about the transparency of the WazirX management.Lawyers Seek Chief Justice of India’s intervention in WazirX hack
Questioning the Socialized Loss Strategy
The letter also highlights the controversial decision by Nischal Shetty and his team to socialize the losses among WazirX users. Initially proposed on 27th July 2024, the strategy aimed to distribute the 45% asset loss among all users. Following a public backlash and a lawsuit filed by another exchange, CoinSwitch, WazirX rolled back this plan. However, users remain critical of this approach and are now demanding that WazirX provide proof of reserves (PoR) to settle the matter.
Singapore Legal Strategy and Use of User Funds
Adding to the controversy, the letter accuses Shetty of using user funds to hire Singaporean lawyers, with a reported legal fee of Rs 100 crores, to secure a moratorium under Singapore’s Insolvency, Restructuring, and Dissolution Act 2018. The letter argues that foreign judgments should not be imposed on Indian citizens and questions the legality of designating users as contingent creditors under Singaporean law.
Calls for National Investigation
In light of these allegations, the letter demands an investigation by India’s national agencies, including the CBI and ED, into the alleged mismanagement and breach of trust. The lawyers question how the hacker gained access to sensitive wallet information and suggest that the entire incident could have been orchestrated from within WazirX. They also call for a deeper probe into the exchange’s handling of user funds and the transparency of its operations.Lawyers Seek Chief Justice of India’s intervention in WazirX hack
Legal and Constitutional Concerns
The letter asserts that while the right to property is no longer a fundamental right, it remains a valuable constitutional right. The complainants argue that penalizing Indian citizens for losses incurred through no fault of their own is unjust and unconstitutional. They urge the judiciary to hold Nischal Shetty and his team accountable under Indian laws, including the Bharatiya Nyaya Sanhita Act 2023.
This letter marks a major escalation in the legal conflict involving WazirX and Nischal Shetty. With 1.5 crore users demanding justice, the case could set a precedent for regulating and holding digital asset exchanges accountable in India, with potential implications for the broader crypto industry.
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