The Delhi Police Special Cell arrested a man named SK Masud Alam from West Bengal for his suspected involvement in a major cyberattack on the cryptocurrency exchange WazirX. This attack happened on July 18 and led to a huge loss of around Rs 2,000 crore (over $230 million) in digital assets.

The police team investigating this case, called the Intelligence Fusion and Strategic Operations (IFSO) division, is working to understand how the hackers were able to break into WazirX’s systems. During the attack, hackers managed to access WazirX's "hot wallet," a digital wallet that stores funds online for easier transactions. They even tried to access the "cold wallet," which is kept offline and is usually more secure for storing funds.

Alam allegedly set up this account using a false name, "Souvik Mondal." He then sold this account to another person, M. Hasan, through the messaging app Telegram. Hasan is believed to have used this account to hack into WazirX’s security. Alam’s arrest is an important step in the investigation, as police work to understand the full series of crypto transactions involved in this hack.

Digital custody firm’s role in question

In the official report from the Delhi Police, investigators mention that Liminal Custody, a company responsible for helping secure WazirX’s digital wallets, has not cooperated with the investigation. Liminal Custody manages certain wallets that require multiple approvals (multi-signature wallets) to process transactions, which it handles jointly with WazirX. However, even after several requests, the company has not shared important information the police need. This lack of cooperation has made it harder for the police to fully understand what happened in this massive cyber theft.

According to the chargesheet, Liminal Custody's role in the case will be addressed further in a supplementary chargesheet, and police are now examining its security protocols to assess its level of accountability in the incident.

Seizure of devices for further investigation

In their investigation, the police took three laptops from WazirX. WazirX authorised users used these laptops to authorise transactions for "multi-signature" or "multi-sig" wallets. These wallets need several approvals, or "signatures," to complete a transaction, which makes them more secure. The police are looking into whether these wallets were misused in the cyberattack, as they played an important role in the hacking process. Unlike Liminal Custody, WazirX has fully cooperated with the investigation, providing important details like customer identity (KYC) information and transaction records.

The Indian Cyber Crime Coordination Centre (IFSO) supported the investigation, and as per the current findings, no unauthorised access to WazirX’s systems has been detected either locally or remotely.

WazirX’s role in cryptocurrency trading

 

WazirX, started in 2018, is a platform where people can buy and sell cryptocurrencies like Bitcoin and Ethereum. It also offers additional features, such as staking (where users earn rewards by holding certain cryptocurrencies) and peer-to-peer transactions (direct trades between users).

WazirX is also connected with Binance, one of the largest cryptocurrency exchanges worldwide. Due to the recent cyberattack, WazirX lost almost 45 percent of its stored assets, raising serious concerns about the safety of cryptocurrency exchanges in India.