WazirX Recovery Hindered by Ongoing Ethereum Transfers via Tornado Cash

The WazirX recovery efforts have faced significant setbacks as hackers continue to send Ethereum through Tornado Cash, a move that complicates the tracing of stolen funds. The exchange, which was targeted in a midsummer hack resulting in a loss of $230 million, has struggled to regain control of the assets.

Since Monday, hackers have moved approximately 15,000 ETH (almost $40 million today) through several transactions. This activity comes in the wake of a High Court of Singapore ruling that granted WazirX a four-month moratorium to restructure its liabilities after the substantial hack.

WazirX Hackers Exploit Tornado Cash

Last week, the main wallet involved in the WazirX hack moved around $33 million worth of Ethereum to Tornado Cash. This decentralized mixer uses smart contracts to anonymize the origins of cryptocurrencies, complicating the tracking process. Despite the U.S. Treasury’s sanctions in 2022, Tornado Cash continues to operate, with the hackers persistently transferring the funds to other wallets and using the mixing service.

Arkham Intelligence reveals that the hacker’s main wallet still retains over $6 million in various crypto assets, primarily Ethereum. These activities are visible on Etherscan, highlighting that approximately $57 million worth of assets were dispersed over the past week.

Impact on WazirX Users and Authorities

The relentless efforts by hackers to obfuscate the stolen funds through Tornado Cash have worsened the status of WazirX affected users. The decentralized nature of Tornado Cash, which handled nearly $2 billion in transactions through July 2024, poses significant challenges for tracing and recovering assets.

During the hack, WazirX lost $97 million in Shiba Inu (SHIB) and $53 million in Ethereum, with the total stolen amounting to $230 million—over 45% of WazirX’s total reserves. Following the attack, the exchange initiated restructuring measures to address its financial responsibilities.

Nischal Shetty, WazirX founder, pointed fingers at various parties, including custodian Liminal for purported security failings, and Binance, which allegedly held significant funds belonging to WazirX’s parent company, Zettai Labs. Both Liminal and Binance have refuted these claims.

Some expert analysts suggest that the North Korea-linked Lazarus Group may have executed the heist. Jeremiah O’Connor, CTO and co-founder of cybersecurity firm Trugard, noted, “Despite advancements in de-mixing transactions, retrieving stolen funds remains a formidable challenge, especially with entities like Lazarus.”

Anoop Nannra, Trugard’s CEO, added, “Distinguishing genuine receiving wallets from those manipulated by hackers is incredibly complex, making recovery efforts even more arduous.”

For impacted Indian users, the path to recovery is fraught with obstacles, leaving many with limited recourse while legal proceedings remain at a standstill.

According to Nannra, a customer and investor of WazirX is coming to terms with the fact that they may never recover their funds.

Edited by Andrew Hayward and Josh Quittner

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