WazirX to Establish Committee of Creditors After $230 Million Hack

Highlights:

• WazirX forms a Committee of Creditors to involve users in its restructuring process.
• Hack victims may not fully recover their funds as WazirX restructures.
• Zettai will oversee WazirX’s creditor selection amid a $546M claims process.

WazirX is taking steps to address the aftermath of its security breach that occurred in July. To initiate the recovery process, WazirX announced the formation of the COC by October 9. WazirX expects the first meeting of this committee to take place within a week after it is formed.

Formation of the Committee

WazirX has outlined a structured process for selecting creditors who will comprise the COC. WazirX will sort creditors, categorized by their claims, from smallest to largest. The exchange will divide this classification into ten separate groups, with each group representing 10% of the total claims. The overall claims amount to about $546.5 million, as per WazirX’s recent announcement.

WazirX is forming a 10-member Committee of Creditors (CoC) by October 9 to help restructure its liabilities after a $234 million hack.

— Startup Spectrum (@SpectrumStartup) October 4, 2024

Creditors who express interest in joining the COC will be placed in a Potential COC Member Pool. From this pool, one creditor from each group will be randomly selected. The exchange seeks to ensure balanced representation within the committee.

WazirX Legal and Financial Considerations

Zettai will establish and oversee the COC. The company is also collaborating with Kroll, a financial restructuring firm, to devise a robust restructuring plan. The Singapore Court may require Zettai to submit the identities of the selected COC members. The Court recently granted WazirX a four-month moratorium.

The moratorium allows the exchange to implement a restructuring plan aimed at partially reimbursing the affected users. In addition, the first phase of the creditor selection process is set to conclude soon. 

Zettai plans to send emails to specific creditors identified during this initial phase. The creditors must express interest in joining the COC by October 7. The second selection phase is expected to finish by October 8, with the final ten members being announced by October 9.

Upcoming Meetings and Transparency

The company will notify selected COC members at least 48 hours before any proposed meetings. The formation of the committee has been criticized by several users. Many users have taken to social media to voice their concerns and seek clarity on the benefits of committee membership. One user questioned the potential impact of creditor suggestions on the restructuring scheme. 

Day 78#WazirX @NischalShetty,what will the benefits of becoming members of this committee if u are not implementing any suggestions taking from COC members into this creditors restructuring scheme@WazirXIndia Do whatever u want to do,but never try to play with users feelings pic.twitter.com/5TV4eJkzYU

— Sandeep Jaswal (@iSandeepJaswal) October 3, 2024

WazirX has scheduled its third virtual town hall meeting for October 4. This meeting aims to clarify the COC selection process and provide further details to the affected users.

Context of the Security Breach

The security breach at WazirX resulted in the transfer of assets valued at $234.9 million to an unidentified address, prompting the suspension of withdrawals. In August, the platform revealed intentions to let customers retrieve as much as 66% of their INR funds. Nevertheless, a large number of users still doubt the exchange’s dedication to complete recovery. 

In September, Zettai Pte Ltd, the company behind WazirX, sought a moratorium from the High Court of Singapore under the Insolvency, Restructuring, and Dissolution Act, 2018. Moreover, the court approved the request, marking a significant advancement in the exchange’s attempt to manage its financial challenges.

As WazirX moves forward with its restructuring plan, the establishment of the COC represents a pivotal moment in addressing the fallout from the hack. Affected users are watching closely to see how this process unfolds and what it means for their recovery.