When a Crypto Exchange Is Hacked: Legal Options for Indian Investors

On 18 July 2024, millions of Indian crypto investors woke up to find that WazirX, then one of India’s best-known exchanges, had lost around $230 million in a hack of one of its wallets. Withdrawals were frozen. For more than a year, users watched their savings sit locked inside a platform they no longer trusted, while lawyers argued in Singapore and Indian courts about who owed what to whom.

The WazirX saga is the most important case study Indian crypto investors have. This guide explains what happened, how the restructuring worked, what the Madras High Court’s ruling on crypto as property means, and the legal remedies available to Indian investors when a crypto exchange is hacked.

The WazirX hack and restructuring: what happened

After the July 2024 hack, WazirX’s Singapore parent, Zettai Pte Ltd, sought protection from creditors and proposed a scheme of arrangement in the Singapore courts. Rather than treating only the stolen tokens as lost, the scheme proposed to “socialise” the loss across all users, spreading it across everyone’s balances regardless of which coins they held.

The road was bumpy. The Singapore High Court initially rejected the restructuring plan in June 2025, then allowed an amended scheme to be put to a fresh vote. In the August 2025 revote, about 95.7% of creditors by number and 94.6% by value supported it, and the court sanctioned the scheme on 13 October 2025 (Wikipedia; CoinMarketCap). The scheme became effective on 15 October 2025, and WazirX reopened deposits and withdrawals in late October 2025. Users received around 85% of their balances, with recovery tokens for the rest (MediaNama).

For many users, 85% sounded better than nothing. But many altcoins had lost value during the year-long freeze, and users whose coins were never touched by the hack argued they shouldn’t have shared the loss at all.

The Madras High Court: crypto is property that can be held in trust

That argument reached the Madras High Court. A user, Rhutikumari, held 3,532 XRP on WazirX, which were unaffected by the hack. She challenged the plan to reallocate her coins under the restructuring. In October 2025, the court granted interim relief: it held that cryptocurrency is “property” under Indian law, capable of being owned and held in trust, and restrained Zanmai Labs, WazirX’s Indian entity, from reallocating her XRP. It also ordered a bank guarantee pending the dispute (TheStreet; Mondaq; LiveLaw).

Two parts of the ruling matter for every Indian investor:

• Crypto as property. If an exchange holds your crypto in trust as custodian, those coins arguably belong to you, not to the exchange. They shouldn’t be available to cover the exchange’s losses or its creditors.
• Jurisdiction. The court rejected the argument that the Singapore scheme and the Singapore arbitration clause shut out Indian courts. It held that it had jurisdiction because the user funded her account from an Indian bank and used the platform in India (TradingView / Cointelegraph).

It’s an interim order, specific to one user, and the final position will depend on further proceedings. But it’s the strongest statement yet from an Indian court on crypto ownership, and it changes the bargaining power between investors and exchanges. The same property analysis matters for tokens with IP rights attached; see our guide to NFT ownership in India.

Your legal options when a crypto exchange is hacked

There’s no deposit insurance or investor compensation fund for crypto in India, so recovery depends on using the right legal tools quickly.

• Read the user agreement. Find out which entity you contracted with (Indian or foreign), whether there’s an arbitration clause, where its seat is, and what the terms say about custody and ownership of assets.
• Participate in any restructuring. If a scheme of arrangement or insolvency process is proposed, file your claim, vote, and raise objections on time. Courts give weight to creditors who engage.
• Seek interim protection in India. Even where the arbitration seat is abroad, Section 9 of the Arbitration and Conciliation Act lets you ask an Indian court for interim measures, such as stopping the reallocation of your assets, as in the Madras case.
• Assert ownership, not just a debt. Argue that your coins were held in trust and are your property. That distinguishes you from an unsecured creditor sharing a common pool.
• Consider collective action. Investors with the same claim can file a representative suit under Order I Rule 8 of the Code of Civil Procedure, or bring a complaint to the Central Consumer Protection Authority, whose remit covers practices affecting consumers as a class.
• File a police complaint where fraud is suspected, so that investigators can trace stolen funds and freeze them where possible. If your own bank account is later frozen because of tainted funds, see our guide to frozen bank accounts over crypto or UPI transactions.

Other Indian courts have also been active in the WazirX dispute. The Bombay High Court allowed CoinSwitch to secure its assets held on WazirX, and the Delhi High Court ordered Zettai to produce documents about its restructuring (Yahoo Finance / Decrypt).

Tax, records and the hard truths

Indian crypto tax law offers little comfort to hack victims. Losses on virtual digital assets can’t be set off against other income or carried forward, so a loss from a hack generally doesn’t reduce your tax on other gains. Recovery tokens and later distributions may also raise tax questions of their own. See our guide to crypto tax in India.

Keep everything: account statements, balances on the date of the hack, emails from the exchange, claim filings, scheme documents, and records of what you finally received. These are your evidence in any claim, and your records for tax.

Remember also that an exchange that has been hacked is itself a victim of crime. WazirX lodged police complaints after the hack, and investigators and blockchain analysts tried to trace the stolen funds. Recovering stolen crypto is difficult once it has been laundered through mixers, but freezing orders against identifiable wallets and exchange accounts are sometimes possible, so investors should support and follow those criminal investigations. Cyber incidents of this kind also trigger reporting duties for the exchange; see our CERT-In 6-hour rule guide. The hard truth is that legal remedies take time, and cross-border cases take longer. In the WazirX case, the fastest relief came to users who acted early, read their contracts and used Indian courts for interim protection.

How to protect yourself before the next hack

• Use FIU-IND registered platforms, while remembering that registration is about anti-money-laundering, not solvency. See our guide to FIU-IND registration.
• Don’t keep everything on an exchange. Self-custody of long-term holdings, in a hardware wallet you control, removes exchange risk, though you then carry the risk of losing your keys.
• Know who you’re contracting with. An Indian entity is easier to pursue in Indian courts than an offshore one.
• Read custody terms. Prefer platforms that state clearly that customer assets are held in trust and segregated from the company’s own assets.
• Spread the risk across platforms rather than concentrating holdings in one exchange.

Quick answers

Is cryptocurrency property under Indian law?

The Madras High Court held in October 2025, at the interim stage, that crypto is property capable of being owned and held in trust.

Can Indian courts help if the exchange’s parent is abroad?

Yes. Indian courts have granted interim relief where users funded accounts from Indian banks and used the platform in India, even with a foreign arbitration clause.

Can I claim a crypto hack loss in my tax return?

Generally no. Losses on virtual digital assets can’t be set off against other income or carried forward.

Related reading: ransomware and cyber insurance and crypto inheritance; also crypto fraud between Dubai and India and enforcing a Dubai judgment or award in India; also using an Indian exchange’s Dubai entity; also smart contract liability for Indian developers; also whether WazirX and CoinDCX are legal.

Final word

At Halverton & Co., we advise investors, crypto and Web3 businesses and digital-asset holders on crypto exchange disputes, investor recovery, arbitration and cross-border claims. We practise in Jharkhand, Maharashtra and before the Supreme Court of India, and act as fractional legal counsel for crypto, Web3 and fintech companies. Halverton & Co.: Where tech needs law!

Write to us at office@halvertonandco.com, or get in touch, to discuss your situation.

This article reflects the law and developments reported up to early October 2026. It is for general information only and is not legal, tax or investment advice. Crypto rules change quickly; please take advice on your specific facts before acting.