WazirX Attributes Recent Cyber Attack to Force Majeure, Pursues Fund Recovery

In a preliminary investigation report released on the social media platform X, cryptocurrency exchange WazirX disclosed that one of its multi-signature wallets suffered a significant cyber attack, resulting in a loss exceeding $230 million. This wallet has been operational since February 2023, utilizing Liminal’s digital asset custody and wallet infrastructure services.

The affected wallet employs a stringent security protocol involving six signatories: five from the WazirX team and one from Liminal. Transactions typically require the approval of three WazirX signatories, all of whom use Ledger hardware wallets to ensure maximum security, followed by final approval from the Liminal signatory. To further enhance security, WazirX implemented a whitelisting policy for destination addresses. These whitelisted addresses are designated and configured through Liminal’s interface, granting the WazirX team the capability to initiate transactions to these pre-approved addresses.

The nature of the cyber attack suggests a sophisticated manipulation of data displayed on Liminal’s interface versus the actual transaction content. At the time of the breach, the information shown on Liminal’s interface did not match the actual signed transactions, leading to suspicions that the attackers may have replaced the payload to gain control over the wallet.

In response to the incident, WazirX characterized the cyber attack as a force majeure event, stating, “This is an event beyond our control; however, we are tirelessly working to track and recover the funds. We have already managed to halt several deposits and have contacted the relevant wallets to initiate recovery procedures.”

The company further elaborated on its efforts, noting, “We are collaborating with the best resources available to assist us in this endeavor. While this report reflects our preliminary findings, we will continue to provide updates as more information becomes available.”

The WazirX team is also working closely with law enforcement agencies and cybersecurity experts to identify the perpetrators and understand the full scope of the breach. This incident has underscored the vulnerabilities inherent in even the most secure digital asset management systems and the ongoing threats posed by cybercriminals to the cryptocurrency industry.

WazirX’s proactive measures following the attack included an immediate review of all security protocols and an enhancement of the existing systems to prevent such occurrences in the future. The exchange is also conducting a thorough audit of its infrastructure to identify any potential weaknesses that could be exploited by attackers.

This attack on WazirX highlights the critical importance of robust cybersecurity measures in the cryptocurrency sector, which remains a prime target for cybercriminals due to the significant value of assets held by exchanges and the relatively nascent state of regulatory oversight.

Industry experts have noted that while multi-signature wallets provide an added layer of security, they are not infallible. The reliance on third-party services like Liminal introduces additional risks, particularly if there are discrepancies between the displayed information and the actual transaction data.

WazirX’s situation serves as a cautionary tale for other cryptocurrency exchanges and digital asset custodians, emphasizing the need for continuous monitoring, regular security audits, and the implementation of advanced security measures to safeguard digital assets.