Bombay High Court Denies Zanmai Labs' Plea Against Arbitral Tribunal's Order To Provide Bank Securities In WazirX Crypto Theft Case

The Bombay High Court has dismissed a challenge by Zanmai Labs, the company that co-operates the WazirX cryptocurrency platform, against interim orders passed by an arbitral tribunal directing it to provide bank securities for investor claims in the aftermath of a cyber attack that led to a Rs 2,000 crore ($234 million) loss.

The tribunal's directions required Zanmai to furnish bank guarantees or deposit funds in escrow to secure claims brought by Bitcipher Labs LLP and Nextgendev Solutions Pvt. Ltd.

Bitcipher, an Indian crypto firm operating under the name CoinSwitch, is a registered broker on the WazirX platform.

It facilitates client trading in virtual digital assets and held a significant portion of assets, particularly ERC-20 tokens that were compromised in the cyber-attack.

A Single bench of Justice Somasekhar Sundaresan dismissed Zanmai's challenge observing that the arbitral tribunal's decision was neither arbitrary nor perverse.

The court noted, “Indeed, the view that Bitcipher must be secured for its claim to its own assets, which were only stored on the WazirX Platform cannot be regarded as perverse or patently illegal, warranting any interference under Section 37 of the Act”

The case arose from a major cyber-attack on July 18, 2024, which targeted the WazirX platform's multi-signature wallets and resulted in the theft of ERC20 tokens then constituting around 40.5% of the asset holdings of broker Bitcipher Labs LLP.

Zanmai Labs, which operates WazirX, had imposed restrictions on withdrawals and later invoked a force majeure clause in its agreements. Bitcipher and its affiliate, Nextgendev Solutions Pvt. Ltd., initiated arbitration proceedings after their clients' digital assets were effectively frozen.

The arbitral tribunal, in orders dated December 16, 2024, and March 12, 2025, directed Zanmai to provide security of Rs 45.38 crore and an additional Rs.5 crores for Bitcipher and Rs 11.92 crore for Nextgendev. These directions were challenged by Zanmai in the High Court.

Zanmai contended that it was not responsible for the breach, claiming that the liability for cybersecurity rested with Binance, which had previously operated WazirX. It argued that the bipartite Broker Agreement with Bitcipher was merely an instrument to avoid double tax deductions and that the actual operational control had shifted to its parent company, Zettai Pte Ltd, and a third party service provider, Liminal.

Bitcipher, in response, maintained that Zanmai had assumed full operational control of WazirX after Binance publicly distanced itself in 2022 and that the Broker Agreement expressly obligated Zanmai to ensure secure and uninterrupted services. Bitcipher argued that Zanmai could not unilaterally transfer custodial responsibilities to other entities without consent.

The court held that the arbitral tribunal had correctly interpreted the contracts between the parties and found no legal infirmity in its reasoning.

It rejected Zanmai's assertion that the Broker Agreement was a mere tax arrangement, noting, “it would be difficult to accept Zanmai's contention that the Broker Agreement was merely a simple instrument solely aimed at obviating double deduction of tax at source. Seen in this light, the substantive and significant interventions made in the Broker Agreement into the contractual arrangement between the parties cannot lend themselves to being regarded as a mere titular framework only to provide a means of obviating double deduction of tax at source..”

The court observed that the agreement was executed in August 2022 around the same time Binance began dissociating itself

It also raised doubts about Zanmai's proposal to “socialise” losses across all users, describing it as lacking contractual foundation and based solely on a scheme proposed in Singapore by Zettai, Zenmai's parent company.

The court remarked that Zanmai's conduct, including its failure to disclose the nature of the dispute with Binance, presented a “high degree of ambiguity at a foundational level,” and that the tribunal was right in perceiving the risk to investor assets.

Finding no error in the tribunal's discretion, the High Court dismissed the petitions.

Case Name: Zanmai Labs Private Limited v Bitcipher Labs LLP

Case Number: COMMERCIAL ARBITRATION PETITION (L) NO. 11646 OF 2025

For Petitioner: Advocates Shyam Kapadia along with advocate Ravitej Chilumuri, Aafreen Noor, Ishita Mundhra, instructed by Khaitan & Co.

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