WazirX barred from offsetting hack losses with customer’s XRP
The Madras High Court barred Indian crypto exchange WazirX from debiting a customer’s 3,532 XRP to cover losses. It also explicitly recognized cryptocurrency as property.
WazirX, an Indian crypto exchange, has obtained an important court decision. The Madras High Court prohibited the platform from using customer assets to redistribute losses among clients and explicitly recognized cryptocurrencies as property.
The so-called "socialization of losses" scheme occurs when a platform covers a balance shortfall by tapping other users’ funds. In practice, it can look like a pro‑rata haircut on account balances or the removal of part of users’ profits/balances to plug holes left by hacks, liquidations, or counterparty defaults.
The case centered on 3,532 XRP belonging to a customer, which were at risk of being debited under a plan to cover the deficit after the 2024 hack.
The court ruled that digital assets constitute property subject to fiduciary protection. As a result, the exchange is not entitled to dilute users’ holdings, even to settle incident fallout. According to the judge, this approach removes conflicts of interest between custodian and owner, aligns digital assets with other forms of property, and provides a clearer level of legal certainty for the market.
For WazirX, the verdict coincided with a return to operations. The platform resumed trading on 24 October after a 16‑month pause prompted by a hack of roughly $235 million. The relaunch features zero trading fees for a limited period and a revamped reserve‑storage model: a significant share of user assets is now held with external custodians under multi‑layer access controls.
Recovery was preceded by approval of a restructuring plan by the Singapore High Court and several internal audits aimed at reducing cyber risk.
The significance of the Madras ruling goes beyond this case. By recognizing crypto assets as property, the court effectively affirms users’ ability to own, dispose of, and defend them in civil proceedings like any other private property.
For the industry, this means clearer playbooks for insolvencies, hacks, and liability settlements and for exchanges, no more compulsory haircuts or socialized‑loss levies. Given the precedent, exchanges should expect increased pressure to strictly segregate client funds and to enhance risk disclosures.
As for WazirX, once India’s largest venue by volume, it will now operate under heightened scrutiny from both regulators and users. Trust in centralized exchanges after one of India’s most high‑profile crypto incidents is very much on the line.
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