The security and protection of user funds is a fundamental responsibility of any cryptocurrency platform. We urge the WazirX team under Zanmai/Zettai to be accountable to WazirX users and compensate them for the funds that have been lost under Zanmai/Zettai management. Their responsibility to WazirX users is unrelated to their dispute with Binance. Their attempts to shift responsibility is a disappointing deflection tactic, but it should not distract anyone from the glaring issue to be addressed here: the need for the WazirX team to be held accountable for user funds lost under their management.
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On July 18, 2024, the WazirX platform reported that it had suffered a cyber-attack on a wallet that held WazirX user funds. This compromised wallet was a multisig wallet that had five signatories from the WazirX team and one signatory from Liminal, a third-party custody solutions provider engaged by the WazirX team. Binance was not involved in the operations of the compromised wallet in any way.
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The WazirX team and Nischal Shetty continue to mislead WazirX customers and the market regarding the relationship between WazirX and Binance. Binance has not owned, controlled, or operated WazirX at any time, including before, during, or after the July 2024 attack. On the other hand, Zanmai, a company incorporated in India, is the entity that registered the WazirX platform with the Indian FIU in 2023, and is recognized by India’s Enforcement Directorate as the owner of WazirX.
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Binance has no responsibility for the operation of the WazirX platform and the consequences of the alleged hack. Zanmai/Zettai and their affiliates accept that they still operate WazirX and that Binance was not involved in the operation of WazirX or the compromised wallet at the time of the attack.
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Binance is not a party to WazirX’s User Agreement, and references to Binance in this Agreement are unauthorized.
Background
The Zanmai-run WazirX platform reported that it had suffered a cyber-attack on July 18, 2024, resulting in the loss of user funds with a market value of around $235 million. The alleged hack precipitated withdrawal requests from WazirX customers that WazirX cannot meet up to this day. On August 27, 2024, Zettai Pte Ltd, a legal entity incorporated in Singapore, made an application to the Singapore High Court for a moratorium to prevent creditors (i.e., WazirX’s customers) from taking collective action against it. Nischal Shetty, the main owner of Zettai, has subsequently submitted two sworn affidavits in support of the application.
Mr. Shetty confirmed that the cyber-attack “represents a theft of digital assets amounting to close to half of the Platform’s digital assets” and that “the Platform would not be able to meet” withdrawal requests.
In his sworn affidavits, Mr. Shetty made several inaccurate statements about the ongoing dispute between Zettai and Binance. Mr. Shetty’s allegations make it clear that he is trying to deflect the blame and claim that Binance may somehow be responsible for the losses suffered by WazirX users and creditors as a result of the cyber-attack. This is false, and any suggestion of the sort is outrageously misleading.
Binance feels compelled to correct several major inaccuracies to help the user community see the situation and its key facts more clearly. However, the following is not intended to be an exhaustive response to Mr. Shetty’s allegations or matters under dispute with Zettai and their affiliates. Binance reserves all its rights to make further comments in the appropriate forum.
The Facts
1. Binance did not acquire WazirX
Mr. Shetty asserts that Binance has acquired ownership and control over WazirX.
As we have stated previously, Binance never acquired or controlled WazirX. While a contract had been signed between the parties, the proposed transaction never closed due to Zettai’s failure to perform its obligations. Binance has never owned, controlled, or operated WazirX at any time, including before, during, or after the alleged hack.
On the other hand:
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Zanmai Labs Pvt Ltd (a company incorporated in India) is the legal entity that registered the WazirX platform with the Indian FIU.
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India’s Directorate of Enforcement, having investigated the WazirX exchange, has stated that Zanmai is the owner of WazirX.
At all times, Mr. Shetty’s team retained ownership and control over WazirX. Zanmai, Zettai, and Mr. Shetty accept that they still operate and have always operated WazirX. For example, Mr. Shetty publicly stated on his social media account on 30 September 2023 that “I’m still running WazirX.”
2. Whatever the outcome of the dispute, Binance does not own or operate WazirX
Mr. Shetty suggests that the outcome of the current dispute between Zettai and Binance may result in a determination that Binance owns WazirX and that this would result in the creditors of Zettai becoming creditors of Binance, with the implication that Binance would be responsible for making WazirX users whole. This is wrong.
Who owns or controls WazirX is not an issue that will be resolved in the ongoing dispute. As we have repeatedly made clear previously, Binance does not own or control WazirX. Zettai and its affiliates accept that they still operate WazirX. In the dispute, Zettai and its affiliates are not seeking a declaration that Binance is the owner, controller, or operator of WazirX.
There is no legal basis, in any scenario, to the claim that Binance would be liable for claims against Zettai (see further below). Any suggestion of Mr. Shetty to this effect is incorrect.
3. Binance is not a party to WazirX’s User Agreement with WazirX users
Mr. Shetty asserts that Zanmai only operates INR-related services on WazirX, while Binance operates cryptocurrency-related services, and points to the WazirX User Agreement as evidence. This is incorrect. Notably, India’s Directorate of Enforcement has found that Zanmai has given “contradictory and ambiguous answers” on this topic to “evade oversight by Indian regulatory agencies”.
Binance does not provide and has never provided cryptocurrency-related services to WazirX users as described in the WazirX User Agreement. As we have said before, Binance had previously provided Zanmai wallet services as a tech solution for their operations of the WazirX exchange, as we do for many other third parties. Binance has never operated WazirX.
The provision of these wallet services to Zanmai was not unique – it was similar to arrangements that we have with numerous other virtual asset service providers (VASPs) globally, including through our Binance Link program. These VASPs use our technology and infrastructure to independently run their business. These other VASPs rightfully do not claim that Binance is providing services to their clients or refer to Binance as a contractual counterparty with their users.
The WazirX User Agreement suggesting that Binance provides services to WazirX users is incorrect and misleading. The references to Binance on the WazirX User Agreement have never been authorized or agreed by Binance. Binance has strongly objected to the unauthorized references to Binance in the WazirX User Agreement and demanded that references to Binance be removed from the WazirX User Agreement. Yet, Mr. Shetty, Zanmai, and related entities, who control WazirX, ignored these demands.
As Binance does not own or control the WazirX platform, as we explained above, it is unable to amend the WazirX User Agreement.
Furthermore, the dispute between Zettai and Binance will not result in Binance becoming a party to the WazirX User Agreement. Zettai seeks no declarations in relation to the WazirX User Agreement.
4. Binance does not hold any WazirX user funds
As we explained above, like many other cryptocurrency exchanges, WazirX previously used cryptocurrency wallets hosted on Binance. WazirX did so even before the potential acquisition of WazirX by Binance, which ultimately never happened.
In January 2023, Binance notified Zanmai and another affiliate of Zanmai that they were required to withdraw funds from a number of Binance cryptocurrency wallets (which included WazirX user funds). As Mr. Shetty accepts in his sworn affidavits, his team withdrew the funds. From that point onwards, no WazirX user funds remained with Binance.
5. Binance has no responsibility for the consequences of the cyber-attack
Mr. Shetty suggests that Binance is somehow responsible for the consequences of the cyber-attack, because Binance requested that the WazirX user funds be removed from Binance wallets. This is incorrect. Binance bears no responsibility for the consequences of the alleged hack.
Binance is not obliged to hold WazirX user funds and gave fair notice that WazirX user funds should be removed from Binance’s wallets long before the attack occurred, which Mr. Shetty’s team did.
Once WazirX users’ funds were removed from Binance, Mr. Shetty and Zettai selected custody solutions provider Liminal to hold these assets. Binance was not consulted about this arrangement and was not aware of it. The choice of the new custodian was exclusively Mr. Shetty and Zettai’s decision. Furthermore, the WazirX team has confirmed that they and Liminal (not Binance) were wallet signatories and the compromised wallet was operated utilizing the services of Liminal and not Binance.
Binance has not been able to verify the alleged cyber-attack. We have requested the WazirX team to provide us with their reports on the incident including all internal reports as well as the purported report from Mandiant from August 14, 2024, which details the cause of the attack, and verification of the amount and proportion of user funds affected, but these requests remained unanswered. We invite the WazirX team once again to produce their reports on the details of the attack.
According to Liminal, an investigation by Grant Thornton “affirm[ed] the security of Liminal’s frontend and backend infrastructure” and concluded that the cyberattack “originated outside of Liminal’s infrastructure”. More details are available here and here.
6. The statements made by Mr. Shetty are inaccurate and misleading
Zettai and Mr. Shetty continue to mislead WazirX customers and the market and perpetuate an inaccurate narrative, including in sworn affidavits made to the Singapore High Court.
In light of the ongoing misinformation propagated by Zettai and Mr. Shetty, it is crucial for WazirX users and the broader market to understand that Binance has never owned, controlled, or operated WazirX at any point, including during the July 2024 alleged hack. Binance bears no responsibility for the operation of the WazirX platform or the consequences of the attack.
Despite Mr. Shetty’s attempts to deflect blame and falsely implicate Binance, the facts remain clear: Binance is not a party to WazirX’s User Agreement, has never owned or operated WazirX, and does not hold any WazirX user funds. We urge the user community to stay informed and critically evaluate the misleading statements made by Mr. Shetty, as Binance remains committed to transparency and user protection. We trust users to be able to come to their own conclusions in light of these facts.