Harsh Gupta, 19, was so fascinated by cryptocurrency that he started trading on the Indian crypto exchange WazirX. He initially used his mother’s name to set up the account because he was a minor. Later, he set up his own account.

When a WazirX wallet was exploited on July 18, Gupta had about ₹60,000 in his WazirX account, and another ₹18,000 in the WazirX account under his mother’s name.

Gupta admitted that he wasn’t really affected by the hack as the amount locked in WazirX was only a small percentage of his investments. Still, he was upset for the many WazirX users who lost lakhs of rupees or even their life savings; he wanted to urgently raise awareness about their plight.

“Many people I know can’t live a normal life now, they can’t eat, they can’t sleep. They are now living in a constant misery and have no clarity of what will happen to their money,” Gupta told The Hindu in an email, adding, “WazirX has no rights to hold on to their user funds. I know some people who can’t pay the hospital bills to treat their family member suffering from cancer.”

Gupta believes the WazirX hack is actually a scam. While some WazirX customers have tried filing cyber police complaints, Gupta felt these attempts were not taken seriously by the authorities.

As one of India’s largest crypto exchanges, WazirX had over four million users holding crypto, out of its userbase of around 16 million. On July 18, one of its digital wallets - managed with another company called Liminal - was breached, and the exchange was slow in updating its users. It did not provide detailed reports about the lost assets, and then indefinitely stopped customers from withdrawing their crypto.

WazirX CEO Nischal Shetty next claimed that he could not compensate users with the company’s profits, because it had been sold to the international crypto exchange Binance years ago. As WazirX users reeled in shock, Binance strongly denied this claim and said that its ownership dispute with the Indian exchange had nothing to do with WazirX’s responsibility to its users.

“As a result of WazirX’s actions, including their reversal on decisions to delist certain cryptocurrencies and their failure to maintain transparent communication with users, I incurred losses totaling over INR 15 lakhs,” Shiva Kumar Shivaraju, another WazirX account holder, told The Hindu. His issues with the platform started even before the hack.

The 47-year-old IT consultant-turned-homestay owner in Karnataka said, “These errors and subsequent misleading emails have caused me immense mental distress, financial harm, and uncertainty about the safety of my investments.”

He would like to see the Indian government better regulating the country’s crypto sector by establishing a dedicated regulatory body.

Is history repeating itself?

While embittered crypto traders live out an investor’s worst nightmare, WazirX pushed ahead with its plans to undergo restructuring in Singapore. The company announced that its operating entity Zettai would be applying for a moratorium. This was intended to obtain more time for the exchange, and to stop angry users from taking legal action of their own against the company.

However, many WazirX users grew more anxious when the exchange introduced Kroll’s Jason Kardachi and George Gwee. That’s because Kroll was involved in the restructuring of another struggling crypto platform called Vauld, which suspended withdrawals in the summer of 2022 due to market conditions.

In response to The Hindu’s email to the Vauld Action organisation, a group of over 20 people from different countries, identifying themselves as Vauld creditors, stated that they were deeply unhappy with Kroll’s actions and the restructuring process.

“We Vauld creditors have been repeatedly lied to, deceived, avoided, and have had our funds drained by excessive costs. The Vauld scheme of arrangement contains creditor unfriendly provisions which give us creditors very little power. At the same time, the scheme protects Kroll and Vauld and provides them maximum power,” wrote multiple Vauld customers in their emails, citing a common statement.

Others shared how much money they had lost and called the restructuring process a “disaster” or a “catastrophe.” Some users claimed that the recovered funds were far less than what they invested, while others said their assets were still stuck on the platform.

Now, numerous WazirX users are afraid they will face similar treatment. As WazirX’s customers took to X (formerly Twitter) to express their frustration, CEO Shetty posted Ganesh Chaturthi wishes and advised his followers to turn to God.

Victims unite and govern themselves

‘Justice for WazirX Users,’ an X account run by the handle @IndiasCrypto, is bringing together affected victims in order to file a police complaint against WazirX and CEO Shetty.

The account’s owner identified themselves as a “sailor” who lost money in the hack, and said their community had 4,500 victims and a Telegram group with 1,800 victims. Approximately 60 had filed online cyber complaints against WazirX, according to them.

“The reaction from WazirX management has been disappointing. Their handling of the situation seems more focused on buying time rather than providing real solutions. The way the hack occurred raises multiple questions about whether it was genuinely a hack or an insider job,” the ‘Justice for WazirX Users’ account administrator told The Hindu in a message on X, adding, “It’s troubling that our fate is being decided by a foreign jurisdiction.”

In the short term, the group is looking to file a criminal complaint as well as a PIL in the Supreme Court. Others are reportedly taking their case to the National Consumer Disputes Redressal Commission (NCDRC) to seek recovery of their funds.

“However, many of the users affected are from middle class families and fear the complexities and repercussions of filing a police complaint. We are also exploring options to escalate the issue with relevant authorities and regulatory bodies to ensure that a fair investigation takes place,” said the ‘Justice for WazirX Users’ account admin.

Post-hack learnings and regret

While Indian crypto investors are often cast as shady characters or dark web users, the reality is that many WazirX investors who are struggling today chose the company because it was a centralised crypto exchange that repeatedly declared it was compliant with Indian regulations.

IT professional, Mayank Bhatodra, 33, has been using WazirX since 2019 but is also a stock trader with market knowledge. He trusted WazirX because it carried out KYC (Know-Your-Customer) documentation and the transactions took place in Indian rupees.

Bhatodra was upset that WazirX had locked up his holdings after the hack.

“In a market as volatile as cryptocurrency, locking users’ funds for an extended period is extremely risky. WazirX should feel the pain that users are experiencing and take steps to fix this situation responsibly. We trusted WazirX as an Indian exchange, and they should not pass the responsibility onto others while leaving users to suffer,” he told The Hindu by email.

What comes next?

WazirX’s users have one thing in common: they are filled with questions.

How was more than $230 million actually lost? Who really owns WazirX? Why were the users’ unhacked assets frozen? How long will investors have to wait to access their own funds? Why isn’t WazirX compensating customers? Will WazirX users be treated like Vauld’s investors?

And finally: why isn’t the Indian government coming to investors’ aid, when it taxes their crypto gains?

Time is running out. WazirX announced on September 26 that a four-month-long moratorium had been granted by the Singapore courts. But crypto prices can crash in a matter of minutes, wiping out billions of dollars in value from the market. While other traders rush to collect profits or minimise their losses, WazirX investors can only watch in despair.

“Now that the hack has happened, I am left asking: why is WazirX forcing its users to bear all the losses? Many of us already purchased crypto at higher prices, and with the market being volatile, our portfolios are already down by 50% or more,” pointed out Bhatodra.

“This is devastating for Indian investors.”

Those in distress or having suicidal tendencies can seek help and counselling by calling these helplines.