Bitcoin Exchange WazirX Suffers $235 Million Loss in Wallet Hack

Key Takeaways:

• WazirX, a major Bitcoin exchange in India, has lost $235 million to cybercriminals.
• The incident drained roughly 50% of the exchange's reserves, affecting multiple cryptocurrencies.
• Withdrawals are temporarily paused as the investigation continues.

Introduction

Indian Bitcoin exchange WazirX has fallen victim to a security breach. This adds to the long list of exchange hacks that resulted in the loss of approximately $235 million in multiple cryptocurrencies, sending shockwaves through the crypto market and raising concerns about the security of centralized exchanges.

Details of the WazirX Bitcoin Exchange Hack

On Thursday, WazirX confirmed via Twitter that one of its multi-sig wallets had suffered a security breach. 

At WazirX, our commitment to transparency and community welfare is paramount. There was a cyber attack on one of our multisig wallets. Below are the preliminary findings to clarify the situation:

» Incident Overview: A cyber attack occurred in one of our multisig wallets…

— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 18, 2024

The Bitcoin exchange said the breach originated from a discrepancy between the information displayed on Liminal's interface and the actual data signed by the multi-sig wallet. Multi-sig wallets require multiple private keys to authenticate transactions, and exchanges favor these types of wallets because they offer an additional layer of security.

Liminal, a crypto custody firm and one of six signatories responsible for transaction verifications on the compromised wallet, shared insights into the incident. 

The firm stated that preliminary investigations indicated a compromise in a self-custody multi-sig smart contract wallet created outside its ecosystem.

Update: Our preliminary investigations show that one of the self custody multi-sig smart contract wallets created outside of the Liminal ecosystem has been compromised. We can confirm that Liminal’s platform is not breached and Liminal’s infrastructure, wallets and assets…

— Liminal Custody🚀 (@liminalcustody) July 18, 2024

As a result, the WazirX exchange launched an investigation and temporarily halted all crypto and rupee withdrawals.

According to Lookonchain data, the stolen funds include a wide range of cryptocurrencies. Over $100 million in Shiba Inu (SHIB) was taken, along with $52 million in Ether (ETH), $11 million in Matic (MATIC), and $6 million in Pepe (PEPE). 

Update:#WazirX has ~$230M in assets stolen. Including:

5.43T $SHIB($102M)
15,298 $ETH($52.5M)
20.5M $MATIC($11.24M)
640.27B $PEPE($7.6M)
5.79M $USDT
135M $GALA($3.5M)
…

‼️Please note that the hacker is selling these assets!https://t.co/1uOozAVeM1 https://t.co/ogtVSFITK9 pic.twitter.com/3vPmxqXwbL

— Lookonchain (@lookonchain) July 18, 2024

The total amount stolen represents approximately 50% of WazirX's reserves, based on their latest Proof of Reserve report, which valued the exchange's holdings at just over $502 million.

Meanwhile, blockchain analytics firm Elliptic noted that the attack bears similarities to incidents attributed to North Korean threat actors. 

Elliptic observed that the attackers swiftly converted the stolen crypto assets to Ether using various decentralized services. 

This observation was supported by crypto researcher ZachXBT, who suggested on X that the hack exhibited potential signs of a Lazarus Group operation.

Bitcoin and Crypto Market Impact

This WazirX hack has had a significant impact on Bitcoin and other cryptocurrencies traded on the exchange. The Bitcoin (BTC) price plummeted by 11% to 5.1 million rupees ($60,945), trading at a massive discount compared to other Indian exchanges. 

BTC/INR Chart showing Bitcoin trading 11% lower than other exchanges

This stark contrast is highlighted by the global Bitcoin price, which remains relatively stable at around $63,600, emphasizing the localized nature of the price drop.

WazirX's native token, WRX, was not been spared from the fallout, falling by 15% to just over 14 cents. 

Notably, the hack is regarded as a significant blow to the Indian crypto community, which is already under scrutiny from regulators.

Indian exchanges have been struggling with low trading volumes since the implementation of a 1% Tax Deducted at Source (TDS) on each transaction, leading many retail customers to prefer foreign exchanges.

This WazirX security incident may likely intensify further discussions about cryptocurrency regulation and the security of crypto funds in India.