In the next few days, it’s going to be exactly two months since the biggest crypto hack in India that led to the loss of Rs 2000 crore of user funds from WazirX exchange. The fate of 4.4 million WazirX users in India hang by a thread, whose ends are controlled by co-founder Nischal Shetty and exchange management, who have unfortunately dealt in deception since day one of the hack.
On September 10, Nischal submitted a supplementary affidavit to the Singapore High Court as part of the moratorium application filed by Zettai Pte Ltd- the Singapore based parent entity of WazirX. Prior to September 10 affidavit, Nischal had also filed an affidavit on August 27. The two affidavits also mention the balance sheet of Zettai as well as the breakdown of INR and crypto holdings of WazirX exchange.
In this exclusive article, we bring a comparative analysis of the two affidavits to show a web of technical errors, deception and anomalies in the workings of Zettai Pte Ltd vis-à-vis WazirX.
WazirX Affidavit: Clarifications and Unanswered Questions
On September 10, Nischal Shetty filed a supplementary affidavit to the High Court of Singapore under the Insolvency, Restructuring and Dissolution Act.
As per Shetty, the two affidavits were meant to provide various updates regarding Zettai’s engagement with creditors, clarifications on anomalies, and some updates on the restructuring process. However, the second affidavit details has only highlighted the obscure dealings of Zettai.
In the first affidavit, the exchange mentioned that at the time of the hack, they had a total fund of $570,068,358 from which $234 Million was stolen. However, they corrected this amount in the second one, mentioning the total funds of $546,472,935 and clarifying that they also included the INR funds.
However, the INR funds are managed by Zanmai which is an Indian entity and the crypto funds were handled by Zettai, a Singapore entity so why are the funds not separated? If the Zanmai and Zettai are different entities, how are INR funds included in the affidavit?
Moreover, WazirX claimed in their July 25, 2024 blog post that 45% of funds were stolen. However, if we subtract the total funds from the stolen funds and calculate the percentage, it comes to 42%.
On June 12, 2024, WazirX Published its Proof of Reserves Report in which the exchange mentioned that it maintains a reserve-to-liabilities ratio exceeding 1:1, but this was not mentioned in the affidavit nor the team mentioned it after the hack.
So if the company has a surplus amount, then why did not the team talk about it? Here are the two scenarios in this case either the company wrote a lie in the report or they don’t want to impact their own funds in this case.
Lack of Transparency In ZETTAI Financial Statement
Through the supplementary affidavit, this was the first time that Zettai Pte. Ltd. shared its financial statements. A closer analysis of the company’s financial statements reveals several red flags and anomalies that raise questions about the accuracy and transparency of the reported figures.
The company unveiled the financial statements for the years 2022 and 2023, where in the financial year 2022, the company WazirX generated $108 Million in revenue and they spent nearly all of it, approximately $80 million on sales and marketing and $18 million on “administrative and other expenses”.
In the year 2023, Zettai generated $12,138,206 in revenue and witnessed an 88% decrease in year-on-year revenue. This sharp drop in revenue has led to a loss of $1,349,800 for the year 2023.
Additionally, the rise in other receivables from $27,773,263 in 2022 to $8,832,063 in 2023, a 68.2% jump is also concerning. The significant rise in receivables was not clearly defined in the financial statement and also raised questions about the recoverability of these amounts.
The financial statement also shows a 91.5% drop in the trade payables and also raises concerns about Zettai’s cash flow management. Moreover, the outflow in the cash flow is also not explained in the statement.
The financial statements lack sufficient disclosure and transparency to fully understand Zettai’s financial position and performance. Key information, such as the nature of other receivables and the reasons for the significant decrease in trade payables, is not provided.
11 White Knights or Just a Delay Tactic?
WazirX stated in their second affidavit that they are in talks with 11 big crypto exchanges for capital infusion (a process where funds are injected into one company by another as an investment). They also added that the WazirX also signed an Non Disclosure Agreement (NDA) with three exchanges.
The exchange also stated that they were in talks of various partnerships, airdrop plans, recovery of stolen funds, allocating tokens by token generation event, and more.
However, a major roadblock in these lofty plans of WazirX is their current legal standing with Binance. Currently, Zettai and Binance are locked in a legal dispute over the management of WazirX platform and custody of crypto holdings. None of the two entities- Zettai and Binance- are in favour of taking responsibility over crypto holdings of users.
Unless the dispute with Binance gets sorted, its highly unlikely these “white knights” will be willing to step forward.
Conclusion
The second affidavit highlights the negligence in operations of Zettai vis-à-vis WazirX where clerical errors are made even in court documents. Also, many questions remained unanswered till now even as agitated users are demanding full withdrawal of their funds.
As the narrative unfolds, questions arise: will the story culminate in redemption or further deception? The stakes are high, and the outcome remains uncertain, leaving investors and stakeholders on edge as they await the next chapter in India’s biggest crypto crisis.
Also Read: WazirX is going to court with support of 0.01% users
