WazirX Restructuring: A Path to Recovery or Delay?
WazirX, a prominent cryptocurrency exchange, is preparing to present its restructuring plan to creditors in the coming weeks. This follows a recent approval from a Singapore court. The exchange has begun notifying creditors about the potential outcomes of this restructuring process. In a tweet, WazirX warned that if creditors vote against the plan, they might have to wait until the end of the decade to receive compensation for the significant losses incurred during a hack in July 2024, which resulted in a loss of approximately $230 million (around Rs. 1,900 crore).
WazirX Outlines Dual Outcomes of Restructuring Scheme
WazirX has clearly outlined two possible outcomes based on the creditors’ decision regarding its restructuring scheme. For the plan to take effect, at least 75 percent of creditors must approve it. If they reject the proposal, the recovery and redistribution of funds could be delayed until the end of 2030. This timeline poses a significant risk for creditors who are eager to recover their lost assets.
The exchange has introduced a compensation scheme that includes the issuance of recovery tokens (RTs) and a mechanism for distributing recoveries through RT purchases. Additionally, WazirX plans to reactivate its platform with new features aimed at enhancing user experience. However, it is important to note that users who lost funds during the hack may not receive full refunds. Many creditors have expressed their dissatisfaction with WazirX on social media, highlighting the growing frustration among those affected.
If the restructuring scheme is not approved, WazirX will need to address its ongoing ownership dispute with Binance. This dispute has been a point of contention since 2021, when Binance initially claimed to have acquired WazirX. However, in 2022, Binance denied completing the acquisition, leading to confusion and uncertainty about ownership. WazirX has indicated that resolving this dispute could be a lengthy process, further complicating the situation for creditors.
The Implications of Approval or Rejection
The decision to approve or reject the restructuring scheme carries significant implications for WazirX and its creditors. If the scheme is approved, creditors could begin the recovery process within a few months. This would allow them to regain some of their lost assets and potentially benefit from the exchange’s new business model, which includes a decentralized exchange (DEX) and profit-sharing opportunities.
Conversely, if creditors reject the proposal, they may face a prolonged wait for compensation. WazirX estimates that it could take up to five years, until 2030, for creditors to see any returns. The exchange has emphasized that a liquidation process would likely result in lower recoveries due to associated costs and delays. Furthermore, creditors could miss out on potential market gains during this extended timeline, as the distribution of fiat assets would not align with any market upswings.
WazirX’s parent company, Zettai, has collaborated with financial restructuring firm Kroll to develop this scheme. In January, Zettai presented the proposal to the Singapore High Court, which approved the extension of the plan to creditors. A spokesperson for the exchange indicated that the voting process is expected to commence by late February or early March.
The Road Ahead for WazirX and Its Creditors
As WazirX moves forward with its restructuring efforts, the exchange is under a court-ordered moratorium lasting 16 weeks. This moratorium protects both Zettai and WazirX from legal actions while they work to implement the restructuring plan. The exchange has made it clear that if the scheme is approved, creditors could see a more efficient recovery process.
The hack that occurred on July 18, 2024, which resulted in the loss of over $230 million, has left many creditors frustrated. Both WazirX and Liminal Custody, which managed the multi-signature wallet that was breached, have denied any wrongdoing that led to the cyberattack. However, the delay in compensation has led to mounting criticism from creditors who are eager for resolution.
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