The WazirX Hack: A Devastating Blow

Shagufa

WazirX hacker stated that they are almost done with the laundering of $230 Million in stolen funds

wazirx, wazirx hacker

In July 2024 one of the biggest hacks took place in Indian Crypro world. The once reigning trading platform of India, WazirX was hacked and the company lost $230 million worth of digital currencies. Even after several months of the incident, the hacker appears to be close to cleaning out the stolen money as per on-chain analysis. There is only about $6 million left in money laundering. In this article, I will bring out the details on the WazirX hack, the flow of the stolen coins and its potential impact on WazirX and the users.

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The WazirX Hack: A Devastating Blow

WazirX was a popular crypto exchange in India that mainly onboard thousands of users who want to trade a variety of crypto assets such as Bitcoin, Ethereum, and Shiba Inu. But in July 2024, there was a catastrophic hack on one of WazirX’s multisig wallets and $ 230 million in cryptocurrency was stolen.

The hacker was able to pull off siphoning out token balances that are valued at more than $100 million such as Shiba Inu (SHIB) and Ethereum (ETH) tokens among others. The loss was more than 45% of WazirX’s total reserves, as the exchange disclosed in its safety report published in June 2024. The financial crisis that the platform faced as an effect resulted in the restructuring of its work as it worked to overcome the effects of the attack.

Washing the Stolen Money via Tornado Cash

After the hack, the culprit continued money laundering activities, and the main tool was Tornado Cash. Tornado Cash is a utility used by people who use cryptocurrency to transfer tokens and make it impossible to trace back to their wallets. While Tornado Cash is a legitimate mixing service that does not require users to provide any personal information to perform a mix, that anonymity is precisely what makes it popular among hackers and criminals: it allows them to launder their stolen funds and obfuscate transaction activity.

The hacker established in the WazirX breach has been gradually transferring the stolen funds through Tornado Cash, thereby making it almost impossible to track the movement of the money. Using live blockchain data from Arkham, it was found that nearly half of the funds have already been laundered. Month by month, the change in Ethereum in the hacker’s wallet also reduced progressively; by September 2024, he would have only $6 million of Ethereum in the wallet, though it originally contained $230 million.

The hacker cashed out more than $50 million worth of tokens using Tornado Cash in August and September with a rise in activity before the most recent transfer of 3,792 ETH which costs approximately $10 million. This move shows that the hacker is almost through with cleaning the rest of the embezzled money.

Tornado Cash is an application whose operation has raised controversy thanks to its effectiveness in washing money in the world of cryptocurrencies. Hackers and criminals prefer using it to mix the stolen cryptocurrency because they basically eliminate the direct connection between the two parties on the blockchains. One key feature of Tornado Cash is that transactions can include transactions of all kinds thereby making it almost impossible for law enforcement agencies to track movement of stolen funds.

But as it is clearly seen Tornado Cash per se is not unlawful though as it being utilized in unlawful operations, it has received attention of law enforcing agencies across the globe. On the 12 th May 2024, Alexey Pertsev, a contributor at Tornado Cash, was convicted of money laundering by a Dutch court and received a 64-month prison term. The conviction pointed to the fact that there was growing concern on spyceries when criminals utilised the cryptocurrency environment.

Challenges that WazirX faced After the Hack

After the incident WazirX company was confronted with numerous loses which are financial and reputation losses. The company has been trying to retrieve the stolen amount back to the company but efforts have been in vain and minimal. Besides the money losses, the exchange is under criticism regarding the response to the crisis.

The users and the industry experts have accused the leadership of WazirX of being very obscure and communicating poorly during the fund recovery exercise. The breach has caused disaffection from its users and many are worried for the security of other assets held on the platform. This has led WazirX to start a restructuring process in Singapore with an aim of overcoming the challenges and obtain a stable structure.

A Proactive Withdrawal of Binance From WazirX

From the preceding text, we have seen that whereas the situation complicates, Binance,which is one of the largest global cryptocurrency exchange, made it clear that it had no involvement in the hack of WazirX. In August this year, WazirX’s founder Nischal Shetty pointed to Binance as having a part to play in running WazirX’s security operations. However, this was short-lived as Binance responded in a tweet, they do not own, control, or operate WazirX.

This disassociation has made the work of untangling the hack even harder and has left WazirX on its own to deal with the event. Going forward, WazirX finds itself in an uncomfortable position as it tries to recoup a flare caused by hack and dealing with a sour relationship with former ally, Binance.

The Future of WazirX and the People Using the Platform

As the hacker goes through the final stage of money laundering, this remains a very sensitive time for WazirX. Now the exchange has to regain the trust of users and install more effective measures of protection against hackers’ attacks. Hence there is slight relief that might be seen in the restructuring process in Singapore, however the future of WazirX’s recovery from this crisis is a question mark.

The incident has created a lot of concerns in users’ minds regarding the security of their assets in cryptocurrency trading platforms. Some are also questioning where they should keep their bitcoins and more are now using decentralized exchanges and cold wallets to protect their monies.

Conclusion

Hack on WazirX as again the lesson of caution on the new world of cryptocurrency. Due to rising strategies used by hackers to penetrate various digital exchanges, there has never been a greater need for proper security features. As WazirX struggled to contain the attack, the cryptocurrency market and all its participants must come to terms with the accelerating pace of cyberattacks and the anonymity providers, such as Tornado Cash, that facilitate those attempts.

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