The WazirX platform (“Platform”), one of India’s largest cryptocurrency exchange platforms with more than 4 million registered users, faced a devastating cyberattack in July 2024 that was perpetrated by North Korean hackers, resulting in the theft of approximately US$234 million in cryptocurrency assets. In response, WazirX has proposed a Scheme of Arrangement (“Scheme”) to restructure its liabilities and provide users with a clear path to optimized recoveries.
This article provides a brief overview of the proposed Scheme. It explains why voting in favour of the Scheme would be the most beneficial move for the intended Scheme Creditors, identified as WazirX users at the time of the cyberattack.
Understanding the Scheme
The Scheme is being proposed under the legal framework set out in, among others, Section 210 of the Singapore Companies Act 1967. Before proposing a scheme of arrangement under this framework, an applicant company must first seek and obtain leave of the Singapore Court to convene a meeting of its creditors, and at this meeting, the company will put the proposed scheme before the creditors for their consideration, and if thought fit, for their approval. A scheme will only be effective when, among other requirements, the scheme is approved by a majority of creditors holding at least 75% of the collective debt present and voting, and the Singapore Court sanctions the scheme.
The present WazirX Scheme is being proposed by Zettai Pte Ltd (“Zettai”), a Singapore-incorporated company that is associated with the Platform, Nonetheless, the proposed Scheme is designed to restructure the cryptocurrency liabilities associated with the Platform in a fair and efficient distribution manner. Here are some of the key components of the proposed Scheme:
● Rebalancing of Assets: The remaining available cryptocurrency assets which are unaffected by the cyberattack will be rebalanced to generally match the proportion of the available assets to the liabilities associated with the Platform to the extent practicable.
● Token Distribution: Scheme Creditors will receive their distribution of the Platform’s available cryptocurrency assets in the form of tokens. Once distributed, Scheme Creditors will get the benefits of any market price-driven upside in token value.
● Recovery of Illiquid Assets: Zettai has considered that there are a number of assets associated with the Platform that are currently illiquid, and as part of the Scheme, intends to actively pursue the recovery of the same. These illiquid assets include, among others, the cryptocurrency assets stolen during the cyberattack. Determined recoveries from such efforts will be used to fund distributions fairly with all Scheme Creditors.
● Profit Sharing: It is also envisaged that under the proposed Scheme and subject to any applicable laws and regulations, the Platform will resume operations with certain renewed functionalities. Profits generated from these aforesaid operations will be used, in the manner prescribed in the proposed Scheme, to fund distributions fairly with all Scheme Creditors.
Voting “Yes” for the Proposed Scheme unlocks benefits for Creditors if the Scheme is successful:
1. Expedient and Practical Access to Assets
In the event that majority users vote YES, and the Scheme is effective, the Scheme provides a quicker resolution with respect to the Platform in the midst of any uncertainty, risk and delays occasioned by or in connection with maintaining the status quo in the wake of the cyberattack and the dispute with Binance. For example, immediate liquidity through the distribution of available rebalanced cryptocurrency assets is envisaged potentially as early as May 2025. In contrast and for comparison purposes with a hypothetical liquidation, reported liquidation cases of a similar nature in the cryptocurrency sphere have proven to be much lengthier and costlier and could take anywhere up to a few years before a first dividend is made. The Scheme offers the most efficient and cost-effective approach, distributing funds within 10 business days of it being effective, avoiding the lengthy and expensive process of liquidation.
2. Improved Recoveries
Scheme Creditors stand to recover ~85% of their claims for the purposes of the Scheme potentially as early as April/May 2025 under an initial distribution. Subsequently, Scheme Creditors can benefit from further recoveries and/or profits generated, in accordance with the Scheme, which will be used to fund further distributions to the Scheme Creditors.
3. Distribution in Cryptocurrency
Distributions will be made in cryptocurrency tokens (not fiat), giving users the opportunity to benefit from potential price upside during a bull run.
4. Legally Binding Resolution
Once approved by Scheme Creditors and sanctioned by the Singapore Court, the Scheme becomes legally binding, ensuring a structured, transparent, and enforceable distribution and restructuring process.
5. User Involvement
Users play an active and direct role in the restructuring process, with the proposed Scheme, which was already tailored and developed with creditors’ interests and preferences in mind, being reviewed and voted on. Zettai has committed to integrating feedback and ensuring users’ voices are heard.
6. Transparency and Accountability
As part of the manner in which the Scheme process is being carried out, Zettai will, among others, provide a comprehensive list of Scheme Creditors and their verified voting decisions, as verified by the Independent Assessor. This ensures transparency and accountability in the process.
The Voting Process
The voting process for the Scheme is straightforward and accessible. Scheme Creditors can vote on an online platform that will be connected to the Platform’s interface over a period of seven business days, allowing ample time for the Scheme Creditors to review the terms of the proposed Scheme, evaluate the benefits, and make an informed decision before ultimately casting a vote. Voting is set to begin on March 19th and last till March 28, 2025.
A Smart Choice for WazirX Users
The proposed Scheme of Arrangement offers Scheme Creditors a good opportunity to receive fair and optimized distributions as quickly as possible. With advantages such as immediate liquidity, improved recoveries, and profit-sharing opportunities, the Scheme proposes to deliver a structured solution that benefits the Scheme Creditors and provides a brighter future for all stakeholders.
This article is contributed by Jason Kardachi, Managing Director of Kroll
Disclaimer: TIL hereby disclaims any and all warranties, expressed or implied, relating to the same. TIL does not guarantee, vouch for or necessarily endorse any of the above content, nor is it responsible for them in any manner whatsoever. The article does not constitute investment advice. Please take all steps necessary to ascertain that the information and content provided is correct, updated and verified.
