Hyderabad: In a key judgement, the Bombay High Court has ruled in favor of CoinSwitch, allowing the crypto exchange firm to recover its assets from WazirX, another crypto exchange firm.

In 2024, cybercriminals stole cryptocurrencies worth 234 million dollars from the wallets of WazirX, one of India’s leading crypto exchanges. The case also involved funds amounting to Rs 62 crore linked to CoinSwitch.

Cumulatively, CoinSwitch had Rs 12.4 crore in Indian rupees, Rs 28.7 crore in ERC20 tokens, and Rs 39.9 crore in other tokens stuck on WazirX, amounting to about 2 per cent of all funds of CoinSwitch.

Since WazirX is currently fully owned by Zanmai Labs, the court held that the company bears complete responsibility for the lost funds.

The Bombay High Court’s single-bench ruling on October 7 regarding the theft of ERC-20 tokens from WazirX wallets, has become a landmark guideline for India’s virtual digital asset industry.

The court emphasised that customer funds are sacred and that users cannot be made to bear losses caused by the mistakes of others. It also rejected a Singapore-based proposal to distribute losses among all customers, thereby prioritising investor protection.

Furthermore, the court disallowed the use or transfer of assets held in custody without user consent. The recent judgment has introduced new regulatory perspectives on crucial issues such as custody, control, and consent within the crypto industry.

The court clearly distinguished between service responsibility and asset ownership, drawing a clear legal boundary. It also rejected unilateral actions taken under the guise of “reconstruction.” The court’s verdict addressed issues related to crypto custody, temporary suspension of services after cyberattacks, and loss of ownership rights, offering important clarity.

Given the rising popularity of cryptocurrencies as an investment option, this verdict has raised new concerns among the investors about the security and reliability of crypto exchanges.

Vikram Subburaj, CEO of Giottus, said that the court’s ruling would strengthen accountability among responsible crypto exchanges like Giottus. He further stated that it is wrong for companies to treat client funds as their own assets on their balance sheets, and that such practices erode customer trust.

“The judgment signals that India is moving toward a more detailed regulatory framework for crypto audits and custodial storage. It reflects global best practices aimed at protecting investors from institutional failures. By issuing this verdict, the Bombay High Court has reaffirmed that India’s legal system supports fairness and accountability, sending a strong message to investors,” he observed.

Vikram stated that the ruling is a confidence booster for the entire crypto ecosystem in the digital age. He advised users to choose crypto exchanges that adhered to the highest standards of security and accountability.

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