WazirX vs. Liminal: Who’s Really at Fault in the $230 Million Crypto Theft?

In a significant development in the ongoing investigation into a massive cyber heist, WazirX, one of India’s leading cryptocurrency exchanges, has publicly accused its wallet service provider, Liminal Custody, of being responsible for a $230 million theft. The accusation comes after a month-long forensic analysis led by Mandiant Solutions, a cybersecurity firm under the umbrella of tech giant Google.

The breach, which took place last month, targeted one of WazirX’s multisignature (multisig) wallets—a security mechanism that requires multiple signatures before any transaction can be executed. The affected wallet was controlled by six signatories, five of which were managed by WazirX, while the sixth was under the custody of Liminal Custody. The exchange temporarily halted most of its operations following the breach to prevent further losses.

In a statement released on Monday, WazirX claimed that the forensic investigation did not identify any compromise within its IT systems. Instead, the exchange pointed fingers at Liminal Custody, asserting that the security lapse occurred on their end. “The findings largely indicate that the issue leading to the cyberattack originated from Liminal. The wallet that was attacked was managed using Liminal’s digital asset custody and wallet infrastructure,” WazirX said.

However, Liminal Custody has strongly refuted these claims. In a counterstatement, the company emphasized that their systems were not compromised during the cyberattack. Liminal raised questions about WazirX’s security posture, operational controls, and the integrity of their network infrastructure. “If one were to go by the information WazirX has shared, this actually raises serious questions on the security of their network infrastructure, operational custody controls, and overall security posture, given that they were the custodians for five of the six keys,” Liminal stated.

Adding fuel to the fire, Nischal Shetty, the founder and CEO of WazirX, took to social media platform X (formerly Twitter) to voice his frustrations, stating that WazirX was yet to receive credible answers from Liminal. He questioned how Liminal’s system approved a transaction that was not supposed to be executed, asking, “Why/How did Liminal’s website show us a genuine transaction that was supposed to be signed and yet send incorrect payload for signing? Why and how did their firewall end up allowing the transaction which was not to the whitelisted address?”

The situation continues to evolve, with both companies standing firm on their positions. While Liminal has empaneled auditors to investigate the breach further, WazirX is awaiting a detailed forensic report. The breach has cast a shadow over the reliability of multisig wallets, a critical security feature in the cryptocurrency ecosystem, and raises concerns about the vulnerabilities in third-party service providers.

This incident serves as a stark reminder of the complexities and risks associated with managing digital assets and the importance of robust security measures in safeguarding against cyber threats. The outcome of this investigation could have far-reaching implications for the cryptocurrency industry, especially regarding trust and accountability between exchanges and their service providers.

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