India’s Regulatory Void Leaves WazirX Hack Victims Without Legal Recourse

Victims of the 2022 WazirX security breach continue to face significant challenges in seeking justice due to India’s absence of a comprehensive cryptocurrency regulatory framework. The $230 million hack exposed critical vulnerabilities in the exchange’s security systems, yet affected users find themselves in a legal limbo as existing financial regulations don’t adequately address crypto-related crimes. Legal experts highlight how this regulatory gap enables bad actors to exploit jurisdictional complexities while leaving victims with few options for recovery. The situation underscores the urgent need for India to establish clear digital asset legislation that protects investors and defines protocols for addressing crypto crimes. Without such framework, exchanges operate in a gray area where security failures often leave users bearing the full brunt of losses.

Then why are Indian crypto users are still forced to pay 1% TDS & 30% tax on profits ?

So, are we only good enough to be taxed but not protected by laws, guidelines or clear regulations… pic.twitter.com/PVKaqO5X6U

— Ajay Kashyap (@EverythingAjay) April 16, 2025

On 18 July 2024, the now-infamous Lazarus Group, backed by North Korea, hacked WazirX. The group exploited vulnerabilities in WazirX’s multi-signature wallet system. They created fake accounts, manipulated smart contracts, and gained full control over the exchange’s funds, ultimately draining all funds.

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Supreme Court’s Rejection Of Petition Puts Spotlight On Regulatory Gaps

Following the hack in early 2024, the victims sought legal recourse and approached the Delhi High Court, to no resolution. Nine months after the hack, the Supreme Court, while dismissing the petition, stated that it is not the appropriate forum to adjudicate the matter and has emphasised that the issue falls under policy rather than judicial jurisdiction.

In their petition, WazirX users had demanded to put together a Special Investigation Team (SIT) comprising officers from the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), the Financial Intelligence Unit (FIU), the National Investigation Agency (NIA), the Central Bureau of Investigation (CBI), and the Serious Fraud Investigation Office (SFIO) to conduct an in-depth probe into WazirX and all its associated entities.

Moreover, the petition also called for an independent team of financial auditors to conduct a forensic audit of WazirX’s books, ledgers, and internal records and report back to the Supreme Court. The court, however, has advised the petitioners to approach the Union Government, RBI,  SEBI, and CBI for a redressal.

Looking in on the ongoing case, market participants have noted the irony of India imposing a 30% tax on crypto gains while failing to offer recourse in case of major incidents, therefore putting a spotlight on organisations like the RBI and SEBI in this obvious case of regulatory gap.

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WazirX Might Push Fund Recovery Process To May

While the legal proceedings in India regarding this case are neither here nor there, WazirX is slowly advancing its restructuring efforts. The company has undergone a court-ordered restructuring process in Singapore after it was hacked in 2024.

The crypto exchange claims that it has secured over 90% credit approval for its fund recovery program. However, investors expect to recover only 45-50% of the funds they lost during the cyberattack.

WazirX had earlier stated its intention to begin with its fund redistribution program within a week of the court approval. However, the company’s recent blog post indicates that delays could affect the program, with users speculating that they could potentially push the timeline to May

There’s some FUD claiming that the WazirX fund distribution is delayed.

It was previously communicated that the next step after the vote is to seek court sanction of the scheme. Court hearing is scheduled for 13th May.

We’re on track and fully focused. Please ignore the noise,…

— Nischal (Shardeum)(@NischalShetty) April 11, 2025

However, responding to social media concerns regarding these delays, co-founder Nischal Shetty clarified that the court hearing had always been scheduled for the following month.

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Key Takeaways

• The Supreme Court dismissed WazirX hack victim’s petition, citing a lack of crypto regulations.
• Investors expect to recover only 45-50% of the funds they lost during the hack.
• The Supreme Court stated that the matter falls under policy and not judicial jurisdiction.