Proof of Reserves or Proof of Risks: WazirX Gambles with User Funds

WazirX management has published its long-awaited Proof of Reserves (PoR) of its available customer balance post the Rs 2000 crore hack. Acting on the directions of Singapore Court, the exchange management released funds bifurcation data which showed that at least Rs 1067 crore ($126.91 Million) of user funds have been sent to three different exchanges- Bybit, Kucoin and HTX, post the hack.

Out of the three exchanges, ByBit has Rs 824.03 crore ($98 Million), Kucoin has Rs 225.4 crore ($26.81 Million) and HTX has Rs 17.65 crore ($2.1 Million). It is imperative to note that out of the three exchanges- ByBit and HTX are not recognized by the Financial Intelligence Unit (FIU) – India and users’ funds are at risk, in case of another cyber attack on these two exchanges.

WazirX had not informed its users before moving their funds to different exchanges. These findings have reignited concerns over crypto exchanges storing user funds outside their native jurisdiction, raising eyebrows over how funds are handled and safeguarded.

Notably, the top ten wallets reflect significant allocations across multiple cryptocurrencies: $77.39 million in Bitcoin (BTC), $26.65 million in TRON (TRX), $22.53 million in Binance Smart Chain (BSC) assets, $5.96 million in Ethereum (ETH), $2.52 million in XEC, $2.35 million in Polkadot (DOT) and others in smaller amounts like $2.52 million including Ethereum Classic (ETC) and  $2.05 million in Internet Computer Protocol (ICP). 

Meanwhile, Nischal took to X to claim that WazirX exchange is on its way to become the “most transparent exchange” and the PoR should end all speculations about crypto balances of the exchange.

Meanwhile, the statement by Nischal hardly had any soothing effect on users and crypto influencers as many questioned the decision to transfer user funds to foreign exchanges that are banned in India from operating.