Consumer Court Dismisses WazirX Hack Victims’ Complaints: What’s Next?

A consumer court in India has dealt a setback to investors affected by the WazirX hack, dismissing their complaints due to the lack of regulatory clarity on cryptocurrency transactions. However, the fight for justice continues as victims plan to appeal to the Supreme Court, while WazirX proposes a recovery plan involving new features and tokens.

• NCDRC dismisses $234 million WazirX hack complaints
• Victims to appeal in Supreme Court
• WazirX to relaunch with recovery tokens and decentralized exchange

The National Consumer Disputes Redressal Commission (NCDRC), a consumer court in India, has dismissed a class action lawsuit filed by investors who lost around $234 million in the WazirX hack. The court cited the lack of regulatory clarity on cryptocurrency transactions as the reason for its decision, stating that cryptocurrencies are neither legal tender nor permitted as investment assets in India. This ruling has left investors searching for alternative paths to recover their losses.

Aman Rehaan Khan, the advocate representing the affected investors, remains determined to seek justice.

“We plan to take this matter to the Supreme Court and seek recovery of lost funds and criminal proceedings against the entities and individuals involved in the matter,” Khan said.

The appeal is scheduled for April, highlighting the ongoing legal battle to address the aftermath of the hack.

Interestingly, the NCDRC’s decision also provided a glimmer of hope by recognizing cryptocurrencies as goods under the Consumer Protection Act and property under the Income Tax Act. This legal acknowledgment could set a precedent for future cases, potentially strengthening the position of investors in the crypto space.

“The forum agreed that cryptocurrencies are classified as goods under the Consumer Protection Act and also fall under the purvey of property mentioned in the Income Tax Act,” Khan noted.

For those unfamiliar, the Consumer Protection Act is a law designed to protect consumers from unfair business practices, while the Income Tax Act governs taxation in India.

The WazirX hack, which affected around 40 investors who lost approximately 12 crores ($1.4 million), underscores the urgent need for clearer regulations in India’s crypto landscape. The Indian government currently imposes a 30% tax on profits from trading digital assets, and crypto exchanges must register with the Financial Intelligence Unit (FIU). However, the Cryptocurrency and Regulation of Official Digital Currency Bill, discussed in 2021, has not advanced, leaving the industry largely unregulated. This regulatory vacuum was further highlighted when the Supreme Court of India lifted the Reserve Bank of India’s 2018 ban on crypto trading in 2020.

In response to the hack, WazirX, led by Nischal Shetty, has proposed a restructuring plan that was approved by a Singaporean court. This plan involves issuing $284 million in liquid assets and recovery tokens to help affected users recoup their losses. WazirX aims to relaunch as a decentralized exchange (DEX), a platform where users can trade directly with each other without a central authority, reducing the risk of hacks. The first three years of profits will be used to fund the purchase of recovery tokens, demonstrating a commitment to investor recovery. For those new to the crypto world, recovery tokens are a form of cryptocurrency issued to compensate users for losses, which can be traded or redeemed for value later.

The path to recovery, however, is not immediate. The voting process for the restructuring plan has been verified by an independent assessor, and the final vote results will be presented at a Singapore court hearing. The first distribution of assets is scheduled for April/May 2025, signaling a long wait for affected investors. In the world of crypto, patience isn’t just a virtue; it’s a necessity.

While the NCDRC’s decision is a setback, the acknowledgment of cryptocurrencies’ legal status and WazirX’s proactive measures offer hope. The ongoing legal and recovery efforts will be closely watched by the crypto community, as they could set precedents for how similar cases are handled in the future. The regulatory vacuum in India’s crypto landscape is a disaster waiting to happen, but it also presents an opportunity for the industry to push for clearer regulations that protect investors while fostering innovation.

As the crypto world continues to evolve, it’s crucial to balance optimism with realism. While the potential for decentralized technologies like Bitcoin and Ethereum to revolutionize finance is undeniable, the challenges and risks are equally significant. The WazirX hack and the subsequent legal battles highlight the need for robust security measures and clear regulatory guidelines to protect investors and ensure the integrity of the crypto ecosystem.

Key Questions and Takeaways

• What was the outcome of the WazirX hack victims’ complaints at the NCDRC?

  The NCDRC dismissed the complaints due to the lack of regulatory clarity on cryptocurrency transactions.

• What are the next steps for the WazirX hack victims?

  The victims, represented by Aman Rehaan Khan, plan to appeal the decision in the Supreme Court to seek recovery of their lost funds and pursue criminal proceedings.

• How has the NCDRC’s decision impacted the legal status of cryptocurrencies in India?

  The NCDRC recognized cryptocurrencies as goods under the Consumer Protection Act and property under the Income Tax Act, providing a legal acknowledgment of their status.

• What measures is WazirX taking to assist its affected users?

  WazirX plans to issue $284 million in liquid assets and recovery tokens, and relaunch as a decentralized exchange to help users recover their losses.

• What is the current state of cryptocurrency regulation in India?

  Cryptocurrency remains largely unregulated in India, with the government imposing a 30% tax on trading profits and requiring exchanges to register with the FIU, but without advancing the Cryptocurrency and Regulation of Official Digital Currency Bill.

As we navigate the complexities of the crypto world, let’s keep in mind that every challenge is an opportunity to build a stronger, more resilient financial future. Whether you’re a seasoned crypto enthusiast or just dipping your toes into the space, understanding these developments is key to navigating the future of money.