WazirX Suffers Major Security Breach: $230 Million Transferred to Suspicious Address

WazirX Suffers Security Breach After Suspicious $230 Million Transfer

As the anticipation builds ahead of the Union Budget next week, the Indian cryptocurrency landscape has been rocked by a major security breach. WazirX, a leading crypto exchange in India, confirmed an incident involving one of its wallets, resulting in an unauthorized transfer of approximately $234 million to a different address.

The breach was announced via the social media platform X (formerly known as Twitter), where WazirX assured its users that the team was actively investigating the matter. To safeguard users’ assets, the company has temporarily paused withdrawals.

“We’re aware that one of our multisig wallets has experienced a security breach. Our team is actively investigating the incident. To ensure the safety of your assets, INR and crypto withdrawals will be temporarily paused,” the company stated.

For those unfamiliar, a multisig (multisignature) wallet is a type of cryptocurrency wallet that requires multiple private keys to authorize transactions, adding an extra layer of security.

Liminal Custody’s Role

Liminal custody, one of the platforms managing WazirX’s wallets, clarified that their infrastructure was not compromised.

“Our preliminary investigations show that one of the self-custody multi-sig smart contract wallets created outside of the Liminal ecosystem has been compromised. We can confirm that Liminal’s platform is not breached and Liminal’s infrastructure, wallets, and assets continue to remain safe,” the company stated.

Liminal reassured users that all WazirX wallets created on their platform remain secure and that the malicious transactions occurred outside their system.

Impact and Industry Reactions

The compromised amount represents nearly half of WazirX’s total assets, according to its Proof of Reserves (PoR) report published in June 2024. A PoR report provides evidence that a financial entity has the holdings it claims, assuring users of the platform’s liquidity.

In light of the breach, industry leaders have expressed concern and advised caution. Ashish Singhal, Co-founder of CoinSwitch, emphasized the security of their platform and advised investors to be wary of market volatility.

“We are aware of the recent security breach on the WazirX platform. We want to assure our users that their funds at CoinSwitch remain secure and unaffected by this incident. We advise all our crypto investors to be mindful of potential market volatility during this time and exercise caution in their trading and investment activities,” Singhal said.

Similarly, Sumit Gupta, Co-founder and CEO of CoinDCX, reassured their users about the safety of their assets.

“In light of the recent #WazirX breach, we want to reassure all @CoinDCX users that your assets are safe and not impacted in any manner. Our wallet security remains robust,” Gupta tweeted.

Regulatory Backdrop

This breach comes at a critical time, just months after the Finance Ministry issued show cause notices to nine offshore Virtual Digital Assets (VDA) service providers, including major names like Binance and Kucoin, for non-compliance with anti-money laundering laws. The Financial Intelligence Unit (FIU) had requested the Ministry of Electronics and Information Technology to block the websites of these platforms.

In response, homegrown crypto firms have been working to create channels that allow investors to transfer their holdings from offshore exchanges to domestic platforms, aiming to enhance security and regulatory compliance.

Conclusion

The WazirX security breach underscores the inherent risks in the cryptocurrency market and the importance of robust security measures. As the investigation continues, both investors and crypto platforms are on high alert, emphasizing the need for vigilance and proactive security protocols in the digital asset space.