In brief
- Zanmai Labs must provide bank guarantees of approximately Rs 45.38 crores to protect CoinSwitch’s claims, following the Bombay High Court’s dismissal of its challenge to arbitration orders.
- The court rejected WazirX’s attempt to “socialize” losses across all platform users through its Singapore parent company’s restructuring scheme.
- Justice Somasekhar Sundaresan ruled that Zanmai cannot escape accountability by claiming cybersecurity was Binance’s responsibility under an alleged 2019 acquisition.
The Bombay High Court has ruled Indian crypto exchange CoinSwitch can secure its stolen assets held on the embattled WazirX platform.
Up until now, WazirX operator Zanmai Labs, which is an Indian subsidiary of Singapore-based crypto exchange Zettai, objected to CoinSwitch retrieving its funds.
In a judgment delivered Tuesday, Justice Somasekhar Sundaresan upheld an arbitration tribunal’s order requiring Zanmai Labs to provide bank guarantees of approximately $5.4 million (Rs 45.38 crores) to protect CoinSwitch’s claims.
WazirX and CoinSwitch both declined to comment when contacted by Decrypt.
The ruling comes more than a year after hackers stole $234 million worth of crypto from WazirX’s multi-signature wallets on July 18, 2024, primarily targeting ERC-20 tokens.
With approximately $9.7 million of CoinSwitch funds frozen on WazirX, the judgment protects CoinSwitch’s ability to recover its assets. It would have otherwise had to accept a loss on its assets alongside other creditors under Zettai’s proposed loss distribution scheme.
Justice Sundaresan rejected Zanmai’s argument that it shouldn’t be held accountable because cybersecurity was allegedly Binance’s responsibility under a 2019 acquisition agreement. Binance has denied responsibility for the exchange.
“If assets are held in the custody of a person under an agreement, it is for the person in whose custody those assets are held to be accountable for the custody of those assets,” the judgment read.
The court found that CoinSwitch’s August 2022 Broker Agreement with Zanmai treated “WazirX as synonymous with Zanmai” and included provisions requiring WazirX to “take best efforts to ensure uninterrupted performance” despite force majeure events like cyberattacks.
The tribunal applied a 45% haircut only to CoinSwitch’s ERC-20 token holdings, the specific asset stolen in the breach, while protecting the exchange’s other assets from Zettai’s proposed “socialization” scheme.
Legal implications
Navodaya Singh Rajpurohit, legal partner at Coinque Consulting and one of the lawyers representing creditors in a separate petition seeking a Special Investigation Team into the hack, explained the judgment’s significance to Decrypt.
“The judgment reiterates the Wander v. Antox standard—appellate courts won’t disturb interim discretion unless it’s ‘perverse or implausible’—and finds no basis to upset the Tribunal’s arrangement,” Rajpurohit said.
The Court found Zettai was “never in the picture in the contract between the parties” and could not be used to justify transferring Zanmai’s contractual obligations, the lawyer noted.
The judgment pointed out “a high degree of ambiguity” regarding disputes between Zettai and Binance, Rajpurohit noted, as WazirX founder Nischal Shetty refused to disclose details in Singapore court affidavits, citing “confidentiality.”
“The Court held that a vulnerable party whose assets are frozen is entitled to protection pending adjudication,” Rajpurohit noted. “The view that users’ assets should not ‘stand eroded due to a security lapse’ was deemed ‘not at all an unfair or an improper finding’.”
WazirX froze withdrawals after the July 2024 hack that hit 40.5% of CoinSwitch’s holdings, prompting CoinSwitch to sue for recovery while using its treasury to keep a 1:1 user reserve.
The ruling dismissed Zanmai’s petitions and directed that contempt proceedings be heard on November 11, 2025.
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