Indian Court Blocks WazirX's Post-Hack XRP Redistribution Plan: Madras High Court Grants User Protection, Recognizes Crypto as Property
Introduction: A Landmark Ruling for Indian Crypto Users
In a significant legal development for India's cryptocurrency landscape, the Madras High Court has intervened to block WazirX's planned redistribution of a user's XRP holdings following the exchange's 2024 hack. The October 25, 2025, ruling by Justice N. Anand Venkatesh grants interim protection to a WazirX user and formally recognizes cryptocurrency as property capable of being held in trust. This decision marks the first tangible legal victory for Indian users affected by the $230 million hack that forced WazirX, once India's largest crypto exchange, to halt withdrawals in July 2024. The court's intervention challenges the "socialized loss scheme" proposed under WazirX's Singapore-based restructuring plan, setting a potential precedent for how Indian courts handle user claims against exchanges operating under foreign jurisdictions.
The Legal Challenge: User Protection Versus Corporate Restructuring
The case emerged when Rhutikumari, a long-time WazirX user, challenged the exchange's right to redistribute her 3,532 XRP holdings under what the exchange described as a "socialized loss scheme." This scheme was tied to the court-supervised restructuring of WazirX's Singapore-based parent company, Zettai Pte Ltd. The Madras High Court recognized the urgency of the matter, noting that "the cryptocurrency was held by her in India by means of the WazirX platform." Justice Venkatesh's order directed Zanmai Labs, WazirX's Indian operator, to furnish a bank guarantee worth roughly 9.56 lakh (approximately $11,500), equivalent to the petitioner's frozen XRP, pending arbitration. This immediate protective measure prevents WazirX from including the user's assets in its broader redistribution plan while legal proceedings continue.
Legal Recognition of Cryptocurrency as Property in India
The ruling carries profound implications beyond the immediate case by establishing crucial legal principles for cryptocurrency in India. Justice Venkatesh explicitly stated that "cryptocurrency is a property… capable of being enjoyed and possessed, and capable of being held in trust." This formal classification marks a significant step in Indian jurisprudence regarding digital assets. By recognizing crypto as property rather than merely a digital token, the court has provided a stronger legal foundation for users seeking to protect their assets from exchange insolvencies or unauthorized redistribution. This classification aligns cryptocurrency with traditional property rights, potentially influencing how other Indian courts approach similar cases involving digital assets and exchange failures.
Background: The 2024 WazirX Hack and Its Aftermath
The legal challenge stems from the July 2024 security breach that resulted in a $230 million hack targeting wallets managed by WazirX's Singapore custodian, Liminal. The hack forced WazirX to halt all withdrawals, freezing thousands of user accounts containing various cryptocurrencies, including XRP. Following the security incident, WazirX pursued a court-supervised restructuring in Singapore through its parent company Zettai Pte Ltd. The restructuring plan, approved by the Singapore High Court earlier in October 2025, proposed that users would receive "recovery tokens" and partial repayments once operations resumed. This approach mirrors mechanisms used in other exchange failures where socialized losses distribute the impact of security breaches across all users rather than isolating the loss to the exchange itself.
Singapore Versus Indian Jurisdiction: A Cross-Border Legal Conflict
The case highlights emerging conflicts in cross-border cryptocurrency regulation and user protection. While WazirX's restructuring plan received approval from the Singapore High Court, the Madras ruling demonstrates that Indian users can seek domestic legal protection even when a company's legal seat lies abroad. This jurisdictional tension underscores the complex nature of crypto exchanges operating across multiple legal territories. The court's willingness to intervene suggests that Indian judiciary may prioritize user protection over foreign corporate restructuring plans when Indian citizens' assets are involved. This development could influence how global crypto exchanges structure their operations in India and handle user assets across different jurisdictions.
Comparative Context: Socialized Loss Schemes in Crypto History
The concept of "socialized loss schemes" has precedent in cryptocurrency exchange failures, though each implementation varies. The approach typically involves distributing losses across all users rather than having the exchange absorb the full impact or prioritizing certain users over others. WazirX's plan to issue "recovery tokens" resembles mechanisms used in other major exchange collapses, where users receive tokens representing their claim against the exchange rather than immediate return of their original assets. However, the Madras High Court's intervention represents one of the first legal challenges to such schemes when they affect users in a different jurisdiction than the exchange's primary legal seat.
Broader Implications for Indian Crypto Regulation
This ruling arrives at a critical juncture for cryptocurrency regulation in India. While the Indian government has been developing comprehensive crypto frameworks, this case provides judicial guidance on key issues ahead of formal legislation. The recognition of cryptocurrency as property could influence upcoming regulatory decisions and provide clearer legal standing for users in disputes with exchanges. For thousands of Indian users still waiting for their tokens from the 2024 WazirX hack, the Madras decision establishes an important principle: that crypto belongs to the user, not the exchange. This user-first approach could shape how future regulations balance innovation protection with consumer safeguards in India's growing digital asset market.
The Path Forward: Arbitration and Potential Outcomes
The court's order represents an interim measure rather than a final resolution. The directive for Zanmai Labs to provide a bank guarantee preserves the status quo pending arbitration proceedings between Rhutikumari and WazirX. This approach allows for specialized examination of the dispute while ensuring the user's assets are protected during the process. The arbitration outcome could establish more detailed precedents for handling similar claims from other affected WazirX users. Importantly, the ruling doesn't force WazirX to immediately return funds to all users, but it creates a legal pathway for individual users to challenge the redistribution plan through Indian courts.
Conclusion: A Defining Moment for User Rights in Indian Cryptocurrency
The Madras High Court's decision to block WazirX's XRP redistribution plan represents a watershed moment for cryptocurrency user protection in India. By recognizing crypto as property and granting interim relief to an individual user, the court has strengthened the legal position of Indian cryptocurrency holders against exchanges operating under foreign jurisdictions. While the ruling doesn't resolve the broader issues stemming from the 2024 hack, it establishes crucial principles that could guide future cases and influence regulatory development. For crypto participants in India and globally, this case underscores the importance of jurisdictional considerations and the evolving nature of digital asset protection across different legal systems. As the situation develops, market participants should monitor both the arbitration outcome and potential appeals, which could further refine how courts balance user protection with corporate restructuring in the cryptocurrency space.