CoinSwitch Sues WazirX Over $9.6M Trapped in Hack

Indian cryptocurrency exchange CoinSwitch has launched legal action against rival platform WazirX to claw back approximately $9.65 million (₹810 million) in funds trapped on the platform following a devastating $230 million cyberattack in July.

Breaking Down the Trapped Millions

The legal battle comes more than a month after WazirX, one of India’s largest crypto exchanges, suffered a massive security breach and subsequently proposed a highly controversial “socialized loss” strategy to distribute the financial damage across its entire user base. CoinSwitch, which operates as an exchange aggregator, revealed that its stuck assets consist of ₹124 million in fiat currency, ₹287 million in ERC20 tokens, and ₹399 million in various other cryptocurrencies.

“We have attempted to be in regular touch with WazirX since the day of the incident, but have not been able to reach a solution to recover the funds that are stuck on their platform,” CoinSwitch stated in a detailed public thread on X.

WazirX Seeks Legal Shield in Singapore

In response to the escalating crisis, WazirX announced on Wednesday that it has filed for a moratorium in Singapore’s High Court to facilitate a restructuring process. The company intends to implement a scheme of arrangement to allocate its remaining assets proportionally among users, who are now classified as unsecured creditors. This restructuring process, which involves clients including multiple Indian law enforcement agencies, is expected to take at least six months as the firm explores options to maximize token recovery.

CoinSwitch Safeguards Users with Treasury Reserves

How CoinSwitch is Protecting Customers

Despite the legal dispute, CoinSwitch emphasized that the trapped funds represent only about 2% of its total assets. Furthermore, less than 1% of its overall assets were directly impacted by the cyberattack, which primarily targeted ERC20 tokens. To ensure user security, the venture-backed exchange—which counts high-profile investors like a16z, Coinbase, and Peak XV among its backers—is utilizing its own corporate treasury to maintain a 1:1 ratio for all user holdings. Currently, CoinSwitch maintains total assets valued at 1.51 times the user assets invested through its platform.

Liquidity Management and Trading Continuity

To guarantee smooth trading operations for its customer base, CoinSwitch maintains a small portion of its liquidity—approximately 7% of its total reserves—on third-party exchanges. This strategy has allowed the platform to remain fully operational and liquid despite the ongoing dispute with WazirX.

A Heavy Blow to India’s Crypto Ecosystem

The lawsuit between two of India’s biggest crypto players highlights the deep systemic challenges facing the country’s digital asset sector, which is already struggling with regulatory uncertainty and security vulnerabilities. The WazirX breach, widely recognized as India’s largest-ever cryptocurrency heist, has severely damaged investor confidence.

Following the July attack, WazirX initially planned to resume operations within a week, proposing a model where users would regain access to only 55% of their assets, while the remaining 45% would be locked in USDT-equivalent tokens. WazirX founder Nischal Shetty later confirmed that the exchange did not carry insurance for customer funds, pointing to a lack of viable insurance options in the market. Shetty warned that recovery efforts could take years, with no guarantee of success. Shetty did not immediately respond to requests for comment regarding the lawsuit.