WazirX Hack: Exchange Refutes Security Lapse Allegations On $230M Exploit

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As a seasoned analyst with years of experience in the cryptocurrency market, I find myself intrigued by the WazirX saga unfolding before us. This isn’t just a hack; it’s a high-stakes game of chess being played out in the open for the world to see.

WazirX is facing intense debate after a significant cyber attack led to a loss of $230 million. This event has prompted concerns about the platform’s safety protocols, and it has ignited a heated discussion between WazirX and TruthLabs, a blockchain security company.

WazirX Hack Under Scrutiny

WazirX, a significant cryptocurrency exchange, strongly refutes allegations suggesting they had security breaches which supposedly resulted in the theft of $230 million worth of customer funds. In response to TruthLabs’ blockchain security firm claims, WazirX argues that their analysis is flawed and deceptive.

In the words of WazirX, their Ethereum wallet uses a secure multi-signature system where transactions can only be approved after four out of six keys have been provided. It’s important to note that this process involves three WazirX key holders and one from their partner, Liminal, ensuring no single entity has control over more than three of the required six signatures. This structure, as explained by WazirX, disputes TruthLabs’ statement suggesting a sole entity controls five out of the six signatories.

As a researcher, I’ve been keeping a close eye on the operations of WazirX, and on July 6th, I sounded an alarm about potential security vulnerabilities affecting various Layer 2 blockchains, such as Blast, Optimism, Mantle, and even Coinbase’s Base. These platforms share a common trait – they use similar multi-signature contracts that potentially expose billions of dollars worth of user funds to risk. Twelve days later, on July 18th, the WazirX exploit occurred, raising concerns about the validity of these warnings.

Additionally, TruthLabs posited that the primary exchange account of WazirX, created in 2022, initially functioned as a Binance account linked to fraudulent activities and theft. They hinted at the possibility that WazirX may not have completely severed ties with Binance as stated. The examination further disclosed that WazirX’s deployer address had only transferred funds to three locations: a Binance wallet, a burn address, and a SwipeX contract, which is suspected of being involved in laundering misappropriated funds.

WazirX has firmly disputed these allegations. They maintain that they’ve always had more than one key holder, not just a single one as suggested by TruthLabs. They underscored that even the malicious transaction causing the attack required signatures from three distinct WazirX signatories and one Liminal signatory. WazirX is confident that this information can be confirmed by examining on-chain data, urging doubters to investigate the blockchain records for verification.

WazirX Proposes Unique Recovery Plan for Affected Users

Regarding the recent hack, WazirX has suggested an innovative 55/45 strategy as a quicker and more adaptable method for recovering funds. This approach gives users two choices for managing their leftover cryptocurrency assets: they can either access 55% of these assets immediately for trading or withdrawal purposes, or the remaining 45% will be transformed into a token equivalent to USDT and kept securely.

As an analyst, I’d rephrase that statement as follows: In my analysis, Nischal Shetty, the founder of WazirX, outlined a strategy where for the 55% portion that has been unlocked, WazirX will construct a well-diversified portfolio by combining various cryptocurrencies drawn from their existing platform assets. If the unlocked portfolio happens to include tokens affected by certain events, WazirX will counterbalance it by swapping out the impacted segment with a collection of unimpacted cryptocurrencies available on their platform.

As someone who has navigated through the complex world of financial management, I have come across various strategies and approaches, but few have sparked as much debate as this one. While its intended purpose was to offer users immediate access to a substantial portion of their assets, thereby providing quick liquidity, it has received heavy criticism within the community.

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2024-08-02 17:53