Zettai Pte Ltd, the parent company of Zanmai Labs which manages the WazirX cryptocurrency exchange in India, has approached the High Court of Singapore to request a moratorium under Section 64 of the Insolvency, Restructuring and Dissolution Act, 2018. The move comes in the wake of a significant cyberattack on July 18, which saw assets valued at approximately $234.9 million transferred to an unidentified address, causing widespread concern among the exchange's users.
The application for a moratorium, submitted on Tuesday, aims to provide Zettai with temporary legal protection as it develops a plan to restructure its liabilities. This step is intended to reassure users about the security of their cryptocurrency balances and facilitate the recovery process, according to a statement on the company’s blog.
The company noted that a date for the hearing has yet to be determined.
Why Did Zettai Apply For Moratorium?
As per the WazirX blog, "Zettai is applying for a moratorium to ensure that Zettai has sufficient time and breathing space to work on a restructuring for the benefit of its creditors, which is the fastest and most effective process for users to receive improved token recoveries. A moratorium is key to ensuring that a restructuring is possible, and it is in the users’ interests to support Zettai’s moratorium application."
The company also clarified, "As users would note, there is an ongoing dispute between Zettai and Binance. As this dispute is subject to confidentiality obligations, please note that we may not be able to disclose certain information relating to the dispute. Nonetheless, while this dispute remains ongoing, Zettai has taken the initiative to concurrently facilitate a solution for users of the Platform as contingent unsecured creditors of Zettai as quickly and effectively as possible."
Zettai has outlined that under the proposed restructuring plan, the financial impact from the cyberattack would be distributed proportionately among all users classified as unsecured creditors. The plan suggests that users would receive their fair share of any recoverable token assets relative to their overall claims against the platform.
If the restructuring plan is approved by the creditors and sanctioned by the High Court of Singapore, cryptocurrency withdrawals may resume according to the terms set out in the scheme, the company stated.
The restructuring process is anticipated to take at least six months to develop fully. As reported by YourStory, Zettai, based in Singapore, owns 99 per cent of Zanmai Labs, while Nischal Shetty, WazirX’s co-founder, holds a 74.27 per cent stake in Zettai.
Other stakeholders include Sameer Hanuman Mhatre with an 18.56 per cent stake, and Siddharth Menon with a 7.17 per cent stake, as reported by Entrackr. In a recent update, WazirX announced that users would soon be allowed to withdraw up to 66 per cent of their Indian Rupee (INR) balances, following the temporary suspension of withdrawals due to the cyberattack.
CoinSwitch Sues Wazirx
Meanwhile, rival cryptocurrency exchange CoinSwitch has initiated legal action against WazirX, seeking to recover assets trapped due to the security breach. CoinSwitch revealed that approximately Rs 810 million ($9.65 million) worth of assets are currently locked on the WazirX platform. This amount includes Rs 124 million in fiat currency, Rs 287 million in ERC20 tokens, and Rs 399 million in other cryptocurrencies.
CoinSwitch, which aggregates various exchanges, has accused WazirX of failing to provide a solution despite ongoing communication attempts since the incident. The lawsuit adds a new dimension to the fallout from the attack on WazirX, one of India’s leading crypto exchanges, which has faced criticism over its “socialised loss” strategy, designed to distribute the financial impact of the cyberattack across its entire user base.
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