Bombay High Court Mandates WazirX Operator to Secure $5.4 Million for CoinSwitch Post-Hack

Executive Summary

On October 9, 2025, the Bombay High Court upheld an arbitration tribunal's order, compelling Zanmai Labs, the operator of the WazirX cryptocurrency exchange, to provide bank guarantees amounting to approximately $5.4 million (₹45.38 crore) to CoinSwitch. This decision follows the freezing of CoinSwitch's funds after a $234 million hack on WazirX in July 2024. The ruling establishes a significant legal precedent regarding custodian accountability for digital assets within the Indian cryptocurrency market.

The Event in Detail

The court's decision, delivered by Justice Somasekhar Sundaresan, dismissed Zanmai Labs' challenge against earlier arbitration orders. The case stems from a substantial cyber-attack on WazirX on July 18, 2024, which resulted in the loss of $234 million in primarily ERC-20 tokens from its multi-signature wallets. CoinSwitch, an institutional partner, had approximately $9.7 million (₹62 crore) of its assets frozen on the WazirX platform due to the breach.

Arbitral tribunal rulings in December 2024 and March 2025 had previously directed Zanmai to furnish bank guarantees or deposit equivalent funds in escrow to protect CoinSwitch's claims. Zanmai Labs contested these directives, arguing that the responsibility for cybersecurity rested with Binance, citing a 2019 acquisition agreement. Furthermore, Zanmai proposed a "socialization" scheme to distribute losses among all affected users, a strategy linked to its parent company, Zettai, in Singapore. The court rejected these defenses, stating, "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."

Financial Mechanics and Business Strategy

The court's mandate requires Zanmai Labs to provide specific financial security. The primary mechanism involves bank guarantees totaling approximately ₹45.38 crore, specifically for CoinSwitch (Bitcipher Labs). Earlier tribunal orders also called for additional securities, including ₹5 crore for Bitcipher and ₹11.92 crore for Nextgendev Solutions Pvt. Ltd., an affiliate of CoinSwitch, reflecting the fragmented nature of the claims. These measures ensure CoinSwitch can secure its assets, preventing it from being subjected to Zanmai's proposed loss distribution scheme.

Zanmai Labs' business strategy centered on disclaiming liability. Its arguments included citing a force majeure clause, shifting blame to Binance for cybersecurity, and attempting to implement a loss-socialization model. The court, however, found "ambiguities and lack of clarity" in Zanmai's explanations, particularly regarding its undisclosed dispute with Binance, and upheld the principle that the custodian of assets bears the responsibility for their security, irrespective of alleged prior agreements or restructuring processes.

Market Implications

This ruling has several implications for the broader cryptocurrency market in India. It significantly strengthens exchange accountability, emphasizing the necessity for robust security measures and transparent custodial practices. For investors, the decision reinforces the framework of investor protection, indicating that courts will hold platforms responsible for asset security. While it may instill greater confidence in legal recourse for users, it also underscores the inherent risks associated with centralized cryptocurrency exchanges and the critical importance of due diligence in selecting platforms with verified security protocols and clear dispute resolution mechanisms.

Broader Context and Precedent

The Bombay High Court's judgment establishes a significant legal precedent for handling crypto-related disputes in India. It clarifies custodial liability in cases of exchange breaches and is expected to influence future regulatory frameworks and operational standards across the Indian crypto ecosystem. This decision contributes to a maturing legal environment for digital assets in the country, fostering a more accountable operational landscape for cryptocurrency exchanges. The July 2024 WazirX hack, one of India's largest cryptocurrency breaches, reportedly involved exploitation of vulnerabilities in multi-signature wallets and has been linked to cybercrime syndicates such as the Lazarus Group. The current ruling marks a critical milestone in defining the responsibilities of crypto platforms and safeguarding user assets in a rapidly evolving digital finance sector.