Madras HC bars WazirX from reallocating user's XRP holdings to offset $235 mn hack, rules crypto is ‘property’ held in trust

The Madras High Court has sided with a crypto holder in a case filed against WaziX by granting a user "interim protection" by preventing the struggling crypto exchange from reallocating its crypto portfolio of XRP assets. The Madras High Court order, passed by Justice N. Anand Venkatesh on Saturday last week, barred the embattled crypto exchange from reallocating its XRP holdings worth $9,400 (3,532 units) to absorb platform losses, which were incurred after the company faced one of the biggest crypto hacks worth $230 million in July 2024.

The decision of the High Court came after WazirX last week resumed its operations on October 24, 2025, after the completion of its restructuring process as directed by the High Court of Singapore and backed by its creditors. The company's restructuring plan aims to socialise losses, even from users who don't own ERC-20 tokens.

"Accordingly, there shall be a direction to the first respondent to furnish a bank guarantee for a sum of Rs.9,56,000 in favour of the applicant and it shall be renewed from time to time till the end of the arbitration proceedings or in the alternative, the first respondent shall deposit the said sum in an escrow…,” the court ruled in the order passed in the matter of Rhitukumari vs. Zanmai Labs Private Limited on October 25, 2025.

The Madras High Court ruled that it is in complete agreement with the findings rendered by the Bombay High Court, wherein it was held that the virtual digital assets held electronically are meant to be held in trust with a fiduciary duty owed to the owners of such assets. "If the asset is stored digitally on the WazirX platform and that because of a cyberattack, if the entire operation stood frozen, whether it can be held that the asset that was possessed by the applicant will stand eroded due to security lapse or security breach and such erosion can be validly spread across all users of the platform and more particularly when such breach did not take place in so far as the asset held by the applicant in a different wallet namely XRP Coins, is a matter to be adjudicated in terms of the agreement," the court ruled.

On October 13, 2025, the High Court of Singapore approved a restructuring scheme proposed by crypto platform WazirX's parent entity Zettai Pte Ltd after the plan was supported by 95.7% creditors by number and 96.6% by value. WazirX last week said it has initiated token distributions to creditors, and will complete the exercise within 10 business days, and that it is working towards the issuance of recovery tokens to creditors.

The Madras High Court, however, ruled that the applicant in this case is entitled to protection because she holds XRP, while the stolen crypto was ERC-20 tokens, which are completely different cryptocurrencies. "What was held by the applicant as cryptocurrencies were 3532.30 XRP coins. What were subjected to a cyberattack on 18.7.2024 in the WazirX platform were ERC 20 coins, which are completely different cryptocurrencies not held by the applicant."

"If, ultimately, based on the modified scheme of arrangement approved by the Singapore High Court on 13.10.2025, the asset held by the applicant stood eroded substantially, the applicant becomes a vulnerable party, who will be entitled to protection... Therefore, the applicant will certainly be entitled to an interim protection in exercise of jurisdiction under Section 9 of the Act."

'...will take all necessary steps': WazirX

When contacted, a WazirX spokesperson said its legal team is carefully reviewing the order and will take all necessary steps in accordance with applicable laws and judicial processes. "We wish to reiterate that the Scheme has been duly approved by the Court of competent jurisdiction in Singapore, with an overwhelming majority of 95.7% of users voting in favour of the Scheme. The Scheme has become effective from October 15, 2025 and is legally binding on all users of the platform," said the company spokesperson.

WazirX said the platform's distribution process has already started after it restarted its operations. "All platform operations, including trading, continue to function as usual. As part of our ongoing commitment to our users, trading fees will remain at 0% for the first 30 days."

Crypto is property: Madras High Court

The court's ruling also describes treating crypto as property; crypto is also a type of property, which can be held on trust. The court ruled that the virtual digital asset, held electronically, is meant to be held in trust with a fiduciary duty owed to the owners of such assets. The owners of such assets indeed agreed that a cyber-attack in a security breach would constitute a force majeure situation. "Property in the legal sense means an aggregate of rights, which are guaranteed and protected by law. It extends to every species of valuable rights and interest...there can be no doubt that “cryptocurrency” is a property. It is not a tangible property, nor is it a currency. However, it is a property which is capable of being enjoyed and possessed (in a beneficial form). It is capable of being held in trust."

The court also ruled that in the Indian law regime, cryptocurrency is treated as a virtual digital asset, and it is not treated as a speculative transaction. "This is in view of the fact that the investment made by the user is converted into cryptocurrency, which is capable of being stored, traded and sold. Cryptocurrency is termed as a virtual digital asset and is governed under Section 2(47A) of the Income Tax Act, 1961."

Reacting to the development, Edul Patel, Co-founder CEO of homegrown crypto Mudrex, says the Madras High Court’s recognition of crypto as “property” is a major step toward investor protection, granting clear ownership rights and legal recourse against fraud, misuse, or exchange failures. "It also redefines exchanges as custodians, demanding stronger governance and transparency. Importantly, the ruling gives Indian courts jurisdiction even when exchanges operate abroad, ensuring accountability," says Patel.

He, however, cautioned that treating all crypto tokens as property could create problems since different tokens serve different purposes. "For example, governance tokens like UNI from Uniswap are used to vote on decisions within a decentralised protocol, not for profit. If such tokens were taxed or regulated as property, every on-chain vote could be seen as a taxable transaction, which would be impractical, as no money is actually being made."

Overall, this judgment marks a win for investor safety, he said.