WazirX awaits creditors' approval for redistribution scheme: Founder

Needs approval of at least 50% of creditors by volume, and 75% by value

Beleaguered crypto exchange WazirX founder Nischal Shetty is banking on creditor approval by a majority of its users for a scheme to surmount its difficulties.

 

The exchange is struggling with financial distress, an ownership dispute with Binance, past tensions with another crypto platform CoinSwitch, and increasing liabilities.

 

WazirX faced an alleged security breach, which affected the platform, leading to a loss of over $230 million in July last year.

 

The company has claims worth $546.5 million and $302 million in assets.

 

A scheme for asset redistribution is tentatively scheduled between March 19 and 28. This approval requires at least 50 per cent of creditors by volume and 75 per cent by value.

 

However, as the platform prepares to resume operations for its 4.3 million creditors — conditional on scheme approval — carving out sufficient liquidity remains a challenge.

 

Shetty acknowledged the liquidity hurdles, particularly for rupee (INR) transactions, while suggesting that crypto-to-crypto transfers (such as USDT, a symbol of Tether, a cryptocurrency pegged to the dollar) were easier to facilitate due to global liquidity sources.

 

“The challenge is on the INR part of it. While we haven’t hammered on that, I think it’s a post-voting process for us. For the USDT, which is like the crypto-to-crypto market, it is fairly straightforward since you can always pull in liquidity easily from other sources since it’s global,” Shetty told Business Standard.

 

As part of the scheme, creditors will receive an initial distribution of the available liquid assets within 10 business days of the scheme becoming effective. They will also get recovery tokens, enabling them to redeem these as part of the company’s recovery.

 

Shetty said if the platform resumed after the approval of the scheme, the company would earmark operational profits for its users upon revenue generation.

 

“For the next three years, the profits we generate will be distributed. For the first $30 million (in shared profits), about 100 per cent will be distributed, following which 50 per cent for the (next) three years,” he said.

 

Zettai, the parent company of WazirX, reported a consolidated loss of $809,490 in 2023-24, down from the $1.34 million in FY23, according to company disclosures.

 

Meanwhile, its revenue was $6.97 million in FY24, down 42.5 per cent from the $12.13 million in FY23.

 

Even as the platform restarts functioning, it may face an exodus of users.

 

“Initially there will be a high number of sellers because there are people who’ve been waiting to sell assets and take advantage of the price movement. So the task will be to bring in more buyers who deposit rupees,” Shetty said.

 

Last year, Binance refuted WazirX’s claim that the global exchange owned the company, stating it did not operate the platform.

 

Shetty maintains that Binance acquired WazirX with the present ownership now in dispute.