In a recent court decision, the Bombay High Court addressed a complex case involving Zanmai Labs and Bitcipher Labs over a crypto trading platform dispute. The court ruled on various issues, including who was responsible for a cyber-attack and the duties outlined in their agreements.
Zanmai Labs, which runs the WazirX trading platform, faced off against Bitcipher Labs, a digital asset service provider using the WazirX platform. The conflict began when Bitcipher deposited funds into Zanmai's account, only to find their balances marked as "pending" because of withdrawal restrictions following a cyber-attack.
On July 18, 2024, a cyber-attack targeted multi-signature wallets on the WazirX platform, affecting assets including the ERC-20 tokens. Zanmai claimed that the attack was an uncontrollable event, meaning it was beyond their control. Bitcipher, however, argued that Zanmai should ensure security despite such claims.
"The theft of ERC-20 assets is said to have had an impact of approximately USD ~235 million."
Judge Somasekhar Sundaresan looked at the agreements between the parties. While the User Agreement involved Binance, Zanmai, and users, the Broker Agreement was directly between Zanmai and Bitcipher. Zanmai claimed Binance was responsible for security, but the court noted that Zanmai had taken on these responsibilities after Binance stepped away.
Zanmai suggested spreading the losses from the cyber-attack across all users of the platform, a plan not supported by the contracts. The court found this idea of "sharing" losses lacked a basis in their agreements and was based on a plan proposed in Singapore, which was not required for Indian users.
The court upheld the arbitral tribunal's decision, which required Zanmai to provide security for Bitcipher’s assets. The tribunal allowed a 45% reduction (haircut) for the compromised ERC-20 assets, balancing the interests of both parties.
"The Learned Arbitral Tribunal has modified and moulded the relief to reduce the scope of the security to be provided by Zanmai."
The court decided that Zanmai must secure Bitcipher’s assets and rejected the idea of spreading the losses among all users without a contractual basis.
