Crypto Platform WazirX Suffers Mega Cyber Breach, Loses Digital Assets Worth $234 Million

India's leading cryptocurrency exchange WazirX on Thursday said it has suffered a massive data security breach, resulting in the alleged transfer of about $234 million worth of digital assets to a different address, as crypto exchanges continue to face the regulatory heat.

The crypto platform confirmed the security breach on social media platform X and has temporarily paused customer withdrawals from the exchange.

"We’re aware that one of our multi-sig wallets has experienced a security breach. Our team is actively investigating the incident. To ensure the safety of your assets, INR and crypto withdrawals will be temporarily paused," said the company.

A multisig wallet is a crypto wallet that requires two or more private keys to unlock and withdraw funds.

In another X post, the company acknowledged a cyber attack occurred in "one of our multisig wallets involving a loss of funds exceeding $230 million". This wallet was operated utilizing the services of Liminal's digital asset custody and wallet infrastructure from February 2023.

According to WazirX, the cyber attack stemmed from a discrepancy between the data displayed on Liminal's interface and the transaction's actual contents.

Last December, the crypto exchange WazirX saw its trading volume nosedive to $1 billion in 2023 -- a massive 90 per cent drop from 2022 -- amid regulatory pressure from the government and a heavy crypto tax regime. In 2022, the Indian government introduced a 30 per cent tax on virtual currencies and a 1 per cent deduction for every crypto transaction. In the same year, the Enforcement Directorate (ED) investigated several cases under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) and the Foreign Exchange Management Act, 1999 (FEMA) related to cryptocurrencies.

WazirX’s accounts worth Rs 64.67 crore were frozen in August 2022 after the ED launched a money laundering investigation into the crypto exchange's alleged role in assisting 16 Indian fintech firms and loan apps by transferring money for them to unknown foreign wallets, according to reports. The ED later lifted the ban on WazirX accessing its bank accounts, allowing the crypto exchange to resume its banking operations.