In a staggering blow to the cryptocurrency community, WazirX, one of India’s largest crypto exchanges, has been rocked by a major security breach. This hack has resulted in the loss of nearly half of WazirX’s reserves. 

The exchange, which boasts over 16 million users, abruptly halted withdrawals after hackers siphoned off $230 million in various cryptocurrencies from its multisig wallets.

How Did the Hackers Penetrate WazirX?

The breach, detected on 18th July, targeted WazirX’s multisig wallets, which typically require multiple private keys for transaction authorization. It appears the hackers exploited a vulnerability involving a wallet operated by six signatories, including one from digital asset service Liminal. 

According to reports, discrepancies between data displayed on Liminal’s interface and actual transaction contents allowed the attackers to manipulate and transfer control of the wallets to themselves.

"We're aware that one of our multisig wallets has experienced a security breach. Our team is actively investigating the incident," WazirX acknowledged in a statement following the breach.

The Extent of the Loss

The stolen funds included a wide array of cryptocurrencies, with Ethereum tokens worth $52 million, Matic tokens worth $11 million, and Pepe tokens worth $6 million among them. 

Additionally, $135 million in Tether and $3.5 million in Gala were reported stolen, prompting concerns over the security of digital assets on centralized exchanges.

Reactions and Recovery Efforts

In response to the breach, WazirX announced a substantial $23 million reward for assistance in recovering the stolen funds, marking it as one of the largest bounties in crypto history.

The exchange called upon white hat hackers, blockchain forensics experts, and cybersecurity professionals to aid in this critical effort.

Impact on the Crypto Community

The hack has raised significant concerns within the cryptocurrency community, with some experts suggesting potential implications for regulatory scrutiny of digital asset exchanges in India. 

Commenting on the incident, Edul Patel, CEO of Mudrex, emphasized the importance of robust security measures and regular audits to mitigate such risks in the future.

“We conduct regular audits to ensure a 1:1 ratio of funds. Additionally, our codebase goes through extensive scrutiny and review at many layers to ensure our tech infrastructure is immune to such exploits.”

Despite assurances from other crypto platforms like CoinSwitch and CoinDCX that user funds remain secure, the WazirX hack underscores the persistent vulnerabilities in centralized exchanges and highlights the ongoing need for enhanced security protocols and regulatory oversight.

As investigations continue and recovery efforts intensify, WazirX users await further updates on when normal operations, including withdrawals and trading, will resume.