India’s largest cryptocurrency hack, which impacted over 4 million users, took a new turn today on 3rd September. The attacker began laundering portions of the $234 million stolen from WazirX.
On Monday, just hours after WazirX’s founder, Nischal Shetty, conducted a briefing on efforts to recover the lost assets, the perpetrator moved 2,500 Ether tokens, valued at approximately $6.3 million, to Tornado Cash — a crypto-mixing service notorious for obscuring the origins of digital assets.
Hackers Start to Move Funds, WazirX Struggles
Arkham Intelligence pointed out the flows, which highlighted the challenges WazirX faces in recovering the funds. The hack has shaken confidence in Indian crypto exchanges, where they are already under pressure from regulatory burdens such as high transaction taxes.
In July, WazirX suffered a severe hack in one of its multisig wallets, leading to the theft of different cryptocurrencies, including $100 million worth of Shiba Inu (SHIB) tokens and $52 million in Ethereum. These stolen funds represented over 45% of the exchange’s total reserves, as reported in June 2024. The seriousness of the hack has forced WazirX into a restructuring process to address liabilities and regain stability.
What is Torondo Cash Mixer?
A cryptocurrency transaction privacy tool called Tornado Cash was created on the Ethereum network. It enables the deposit of many cryptocurrency kinds into a shared pool, following which the user is given a transaction key. Afterwards, a user can enter the key to take money out of the pool and deposit it into an alternative cryptocurrency wallet.
Tornado Cash’s role as a middleman in cryptocurrency transactions is to improve privacy. Cryptocurrency is typically transferred directly between two people, with a record between the sender and the recipient.
To break this record, Tornado Cash accepts cryptocurrency deposits, separates them from their senders, and then returns the funds to any other person in possession of the security key linked to the deposit.
Users Unlikely to Get Full Funds Back?
WazirX’s financial consultants, George Gwee and Jason Kardachi of Kroll, described the present state of affairs in a virtual conference, the New Indian Express reported. They said that attorneys predict clients could get back between 55% and 57% of their money, with about 43% possibly not being recouped. Nischal Shetty, the creator of WazirX, stated that the platform is still in the negotiation stage and is unable to offer specifics regarding fund recovery.
The fact that WazirX and Binance are still at odds over ownership further muddies the waters. The exchange is run by Zanmai India, while a Singaporean company named Zettai, has requested a moratorium in Singaporean courts.
WazirX is now working on reorganising its cryptocurrency balances. Additionally, the platform is looking for alliances and joint ventures, potentially with a “white knight” investor to provide funding and stabilise operations.
Some of the money had been linked to hackers purportedly from North Korea, a country that is well-known for utilising cyberattacks as a means of obtaining foreign currency, according to blockchain forensic company Elliptic.
The Road Ahead
WazirX’s capacity to bounce back from this catastrophic hack is still up in the air while it works through its reorganisation process. The transfer of stolen Ether to Tornado Cash suggests that the attacker is continuing to conceal the stolen assets, making recovery more challenging even while efforts to recover some of the monies are still underway.
The episode has dealt serious damage to the cryptocurrency business in India and significantly affected public confidence in domestic exchanges. WazirX’s future depends on its ability to successfully restructure and maybe secure outside assistance as it attempts to rebuild its reputation and retrieve users’ assets.
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