WazirX isn’t allowed to use Ripple’s XRP to cover platform losses: here’s why

The court confirmed that users’ XRP remains their property, reinforcing that cryptocurrency is legally recognized as a protected asset.

An Indian court has banned crypto exchange WazirX from reallocating a user’s XRP to cover platform losses. The Madras High Court granted “interim protection” and confirmed that the user’s digital assets remain their separate property under Indian law. The ruling marks a key moment in the country’s evolving crypto jurisprudence.

The case stems from WazirX’s plan to adopt a “socialization of losses” model after a $235 million exploit in July 2024. The exchange proposed to spread the losses across all users, including those who owned cryptocurrencies unrelated to the stolen ERC-20 tokens.

Court upholds crypto property rights

Justice N. Anand Venkatesh ruled that the loss sharing approach should not impact the XRP holder. The user’s 3,532 tokens, worth about $9,400, were acquired long before the hack. The judge ruled that XRP and ERC-20 assets are separate in nature and cannot be grouped for recovery purposes.

The court further clarified that the user’s XRP remains their property and cannot be diluted to compensate for the exchange’s operational failures. In doing so, it reaffirmed that cryptocurrency qualifies as a form of property that can be owned and protected under existing law.

To implement this ruling, the judgment also invoked the Arbitration and Conciliation Act, which ensures that the user is provided with legal guarantees until the arbitration proceedings are completed. WazirX must either deposit 956,000 rupees (about $11,500) or provide a bank guarantee for the same amount as interim protection.

WazirX resumes amid major legal shifts

The Madras High Court’s decision comes as WazirX seeks to rebuild its operations following the lengthy suspension following the 2024 breach. The platform resumed operations last week after the Singapore High Court approved its restructuring plan, with support from nearly 95.7% of participating creditors.

WazirX previously attributed the exploit to North Korea’s Lazarus Group, which exploited a weakness in its multi-signature wallet setup. The hack took the exchange offline for 16 months, sparking widespread debate over liability and asset security in the Indian crypto market.

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Against this backdrop, legal observers see the latest ruling as a signal that Indian courts are beginning to recognize digital assets as protected property. The case follows a Bombay High Court decision rejecting similar loss-sharing measures from Bitcipher Labs. These developments could particularly shape future disputes as India moves towards clearer crypto regulations.