Delhi High Court Issues Notices to FIU and ED Over WazirX Hack

In response to the massive Rs 2000 crore hack of cryptocurrency exchange WazirX, the Delhi High Court has issued notices to the Enforcement Directorate (ED) and the Financial Intelligence Unit (FIU). These notices seek clarity on whether an investigation can be initiated against the exchange's management for the security breach that occurred three months ago.

The court's actions follow a writ petition filed by a WazirX user, Jaivir Bains, who called for an investigation into the circumstances surrounding the hack. Bains also raised concerns over the exchange’s attempt to socialize 45% of user losses by pooling non-stolen cryptocurrency funds to cover the hacked amounts.

Court's Response and Investigation Request

The single-judge bench, presided over by Justice Sanjeev Narula, has instructed the Deputy Commissioner of Police (DCP) from the Intelligence Fusion and Strategic Operations (IFSO) unit of the Delhi Police to submit a status report on the ongoing investigation. The court order, outlining further instructions, is expected to be publicly available shortly.

A court source has indicated that while cryptocurrency remains an unregulated sector in India, the Delhi High Court still issued notices to FIU and ED to determine whether an official inquiry can be conducted. “Although the court lacks jurisdiction to directly order a probe, it has sought explanations from FIU and ED on whether they can investigate the hack,” the source revealed.

Petitioner’s Claims and the Court’s Ruling

Jaivir Bains and other affected WazirX users can now take their cases to civil courts to retrieve the funds frozen on the exchange. The hack, which occurred on July 18, 2024, resulted in the freezing of cryptocurrency and INR balances of approximately 4.4 million users. WazirX suspended all transactions following the incident, leaving users in a financial limbo.

In a surprising move, WazirX sent a thank-you message to 9000 users who reportedly did not support the exchange during the crisis—a gesture that has sparked curiosity across the crypto community.

Delhi High Court Takes Action: WazirX Hack Investigation Underway#CryptoExchange #HackAlert #DigitalAssets #UserSafety #LegalAction #CryptoRegulation #Fintech #Cybersecurity #InvestmentProtection #CryptoInvestors #DataBreach

For more information:- https://t.co/fpCDN2QGRj pic.twitter.com/KkN8KKukdT

— All around worlds (@all_aroundworld) October 18, 2024

Ongoing Investigations and Future Actions

The Rs 2000 crore WazirX hack continues to be a subject of investigation. The IFSO unit has been actively probing the incident, and the High Court has demanded a status update. This report will play a crucial role in determining whether further legal actions are necessary.

The High Court’s recent ruling allows users, such as the petitioner, to seek legal recourse in civil courts to recover their funds. At the same time, the involvement of ED and FIU could introduce additional layers of scrutiny, potentially impacting WazirX’s management and operations.

Focus on WazirX Parent Company

The petition also calls for an inquiry into Zanmai Labs, one of the parent entities behind WazirX, co-founded by Nischal Shetty. The entity is under scrutiny for its role in the exchange’s management, especially concerning the hack and the subsequent withholding of user funds.

While the court has not made any conclusive findings, it has acknowledged the petitioner’s submissions, allowing the case to move forward. As investigations continue, WazirX faces increasing legal and reputational challenges.

What’s Next for WazirX and Its Users?

The Delhi High Court’s decision to involve key financial regulatory bodies could signal the beginning of a more comprehensive investigation into WazirX. For now, affected users are left waiting to see if they can recover their frozen assets.

As India’s legal landscape for cryptocurrency evolves, the outcome of this case will likely shape the future of how digital assets and exchanges are regulated in the country. All eyes will be on the next steps taken by the authorities, as well as WazirX’s response to the growing scrutiny.