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Embattled Indian cryptocurrency exchange WazirX is facing a backlash after proposing a “socialized loss strategy” following a hack that caused $230 million in losses.
The criticism erupted on July 27, when the exchange tabled a poll dubbed “Withdrawal Management Programme: Opinion Poll” with two options.
The first allows users to access 55% of their funds for trading without the ability to withdraw, but they receive priority during the recovery process.
The second option is for users to access 55% of their funds, with the ability to trade and withdraw, but they will receive secondary priority during the recovery process.
45% of the remaining funds will be converted to USDT before being locked.
WazirX Faces Community Backlash
The poll attracted severe criticism from the exchange’s users, with one saying that users should not be punished over the company’s lack of robust security controls.
“It was your responsibility to keep our funds safe,” said @MilanAr97154294 on X. “Since its your mistake u need to pay back our hard earned money. Raise funds, sell your properties give our money back to us.”
It was your responsibility to keep our funds safe since its your mistake u need to pay back our hard earned money. Raise funds, sell your properties give our money back to us.
— Seeking Connection Summer of Shibarium (@MilanAr97154294) July 27, 2024
Other users also questioned the socialized loss strategy, given that only exchange users holding certain cryptos were affected.
The hackers stole $100 million in SHIB, $11 million n MATIC, $7.5 million in PEPE, $5.7 million in USDT, and $3.5 million in GALA tokens.
“Choosing to invest in a coin and losing the funds due to a hack is a risk the investors of said coin chose why should holders of other coins make up for them?” one user said.
Sumit Gupta, co-founder of rival exchange CoinDCX, also slammed the poll, saying WazirX wanted to protect its business at the expense of customers.
WazirX Responds
WazirX defended itself in an X post, saying the poll was not legally binding. Instead, the exchange wanted to gather feedback from users before acting in the best interest of the community.
Dear WazirX Tribe,
We appreciate your active participation in our recent poll from 27 July 2024. We want to clarify that this poll is a preliminary step to understand your opinions and is not legally binding upon the users or the WazirX platform.
We reassure you that this poll… pic.twitter.com/8BkbjhTCjM
— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 29, 2024
The exchange’s co-founder, Nischal Shetty, also posted a video on X explaining why a socialized loss strategy was the best option. He noted that if users agree to the plan, the exchange will resume operations while exploring other ways to reimburse customers the remaining funds.
The WazirX hack was attributed to the notorious North Korean hacking group Lazarus.
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