WazirX Faces Backlash Over 'Socialized Loss Strategy' After $230M Hack

WazirX, an Indian cryptocurrency exchange, is facing criticism after proposing a "socialized loss strategy" following a security breach on July 18 that resulted in a loss of approximately $230 million, or 45% of its assets.

Co-founder Nischal Shetty outlined two options: pursuing legal action, which could be lengthy and costly, or adopting a socialized loss approach. This plan involves users either accessing 55% of their funds immediately with withdrawal restrictions and priority in potential recovery, or accessing 55% with full withdrawal rights but secondary recovery priority. The remaining 45% would be converted to USDT and locked.

The proposal has sparked backlash, with many users feeling unfairly burdened by the losses. CoinDCX co-founder Sumit Gupta criticized the plan, arguing that the company should shoulder the losses instead.

In response, WazirX clarified that the poll was non-binding and intended to gather user input. Shetty defended the socialized loss approach as a way to keep the exchange operational while exploring recovery options.

The hack involved the theft of over $100 million in Shiba Inu, 20 million Matic tokens ($11 million), 640 billion Pepe tokens ($7.5 million), 5.7 million USDT, and 135 million Gala tokens ($3.5 million). There are suspicions that the North Korean state-sponsored Lazarus Group may be behind the attack, raising doubts about the possibility of fund recovery.

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