WazirX Faces SHIB Community Backlash Over Compensation Plan

• WazirX comes up with a dubious solution to the huge $234M hack.
• Customers are urged to make up their minds about the two options.
• SHIB is labeled a ‘stolen asset’ and will be replaced with ‘available’ assets.

The most popular Indian crypto exchange, WazirX, saw a staggering cyber attack on July 18, 2024, that resulted in $234 million drained. Shiba Inu is among India’s top three most demanded digital assets, so SHIB got caught up in the middle of the action. Unfortunately for the SHIB Army, the fraudsters had dumped a massive 5.43T SHIB tokens, piling up to $90 million.

Did WazirX Shift the Blame to Users?

WazirX’s staff announced a controversial “socialized loss” reimbursement plan a week after the hack. According to the explanatory message, 45% of all WazirX’s customer funds were stolen during the hack. Therefore, the crypto exchange decided to “distribute the impact across all users equitably.”

For example, if a user on the Indian exchange holds only Shiba Inu (SHIB) , there will be an entirely new crypto basket with miscellaneous assets WazirX chooses. 55% of the unlocked crypto assets will be replaced with other tokens to match the market value. 

The other 45% of a customer’s crypto assets will remain in the locked supply and be converted to USDT-equivalent digital assets. However, it bears mentioning that SHIB is classified as a ‘stolen token’; therefore, holders who have kept SHIB solely on WazirX will have their whole portfolio replaced.

SHIB Army Questions WazirX’s Integrity

Naturally, this awkward crypto asset rebalance plan has witnessed immense backlash on X. SHIB holders, including popular crypto influencers, called out WazirX for not taking any ownership for their failure to keep their customers’ assets safe.

WazirX’s recovery plan operates on the prices right before the trading was halted on 21st July 2024, 8:30 PM IST. Despite collecting trading fees and providing crypto services to tens of millions of Indian customers, WazirX shifts the blame for the security breach collectively to the same users that the exchange has let down.

As a result, multiple SHIB community members are chanting, “Not your keys, not your crypto!” as a mantra. Others treat the situation as a reminder that centralized exchanges (CEXs) are highly dependent on the parenting company: “This sucks but it should be a reminder to everyone that you should move your tokens to a cold wallet,” utters Wookie Mind Trix.

Notably, the sentiment is shared among crypto enthusiasts, as some are seeing an untouched, outdated balance on-site. However, WazirX explained that “the portfolio you see is based on data before we rebalanced it following the cyberattack” and that it will change after the new valuation method is implemented once trading resumes.

On the Flipside

• The 55% rule of digital assets in the portfolio means that SHIB custodians can swap the USDT received equivalent back to SHIB, while the other 45% remains locked in random assets.
• According to CryptoQuant, Shiba Inu coin’s total exchange reserves have been gradually dropping since early 2023, currently at an all-time low of 146T SHIB tokens in total reserves.

Why This Matters

Cryptocurrency platforms dealing with security breaches normally have a responsibility to their customers. WazirX’s case leaves customers bearing the financial brunt of the service provider’s security lapse, a highly unusual practice.

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