Consumer Court Dismisses WazirX Lawsuit, Victims to Approach Supreme Court in April
Last month, a group of 40 individuals affected by the $233 million hack on cryptocurrency exchange WazirX, filed a class-action lawsuit against the company. However, in a recent verdict issued by the National Consumer Disputes Redressal Commission (NCDRC), the court has dismissed the lawsuit, leaving victims with little hope of recovering their lost assets.
The NCDRC, citing that cryptocurrencies are neither legal tender nor permitted as an investment asset in India, ruled that the primary complaint of 'financial fraud' alleged against WazirX does not have legal ground in the country. The court also stated that it did not have jurisdiction to pass judgment on offshore entities, which is a significant blow to the victims.
The complainants had signed WazirX's terms and conditions and agreed to pursue resolutions to corporate conflicts under Singapore's law. However, the NCDRC ruled that the matter cannot be heard under India's consumer protection regulations due to this clause. Aman Rehaan Khan, the advocate representing the complainants, stated that the group will approach the Supreme Court in April seeking full recovery of the lost assets.
WazirX had previously disclosed that an alleged hack on its platform led to the loss of $233 million in cryptocurrency holdings, mostly under a crypto token called Ether. The company later moved to file for a moratorium against legal prosecution through its Singapore-headquartered parent entity, Zettai Pte Ltd.
Consumers in India had filed the class-action with NCDRC on October 26 claiming that WazirX had defrauded its customers in India. Nischal Shetty, the face and co-founder of WazirX, did not immediately respond to a request for comment on the development.
Senior executives at WazirX had claimed earlier that the company was looking to recover parts of the stolen funds through investigation agencies, and also for a 'white knight'—a corporate term for any entity willing to take over WazirX and its entire business, including its liabilities. However, this news does not alleviate the concerns of customers who were seeking to recover damages worth close to $1 million at the time of filing.
Despite the dismissal of the lawsuit, there are some positive takeaways from the NCDRC's verdict. The bench stated that cryptocurrencies come under the definition of goods under the Consumer Protection Act, and fall under the ambit of property under the Income Tax Act.
WazirX has promised to return 85% of all lost assets to investors through its Singapore court-approved restructuring plan. The company has hosted eight online 'town halls' with its customers, and is yet to announce the next step before its alleged promise to return the vast majority of the funds comes to fruition.
As the situation unfolds, consumers affected by the WazirX hack will have to navigate the complexities of Indian law and seek alternative means of recovering their lost assets. The case serves as a reminder of the regulatory gap surrounding cryptocurrencies in India, leaving millions of Indians stranded without protection or recourse.