WazirX Creditors to Decide on Compensation Plan
WazirX creditors are facing a crucial decision in the upcoming weeks regarding the compensation for their lost crypto assets. The choice is between beginning to receive compensation as early as April 2025 or undergoing a prolonged recovery process that could stretch until 2030.
High Court Ruling
The Singapore High Court recently ruled in favor of WazirX, allowing the embattled Indian exchange to pursue a restructuring plan instead of facing liquidation. The success of this plan depends on the approval of three-quarters of the creditors.
Compensation Plan Details
If the required threshold is met, WazirX will implement a phased compensation plan which includes the following:
- Launching a decentralized exchange (DEX)
- Issuing recovery tokens
- Conducting periodic buybacks to reimburse affected users
Divisive Proposal
Despite claims by WazirX that creditors could recover up to 80% of their balances through the new DEX and recovery token model, the proposed recovery plan has sparked controversy. Many users remain skeptical, with concerns about the five-year delay being seen as a strategic move rather than a genuine recovery effort.
Uncertainty and Tax Implications
The uncertainty surrounding the recovery plan is further compounded by India’s government imposing a 70% penalty on undisclosed crypto gains. This could have significant tax implications for users receiving recovery tokens, making the decision-making process even more complex.
Fallout from the Hack
WazirX, once India’s largest crypto exchange, faced a major setback in July 2024 when hackers stole over $230 million in user funds. The hack, coupled with regulatory investigations, led to a tumultuous period for the exchange.
To address the aftermath of the hack and regulatory scrutiny, WazirX proposed a restructuring plan to avoid collapse. The Singapore High Court’s ruling in favor of restructuring provides a lifeline for the exchange, pending creditor approval.