Bombay High Court Ruling Reinforces Fiduciary Duties for Crypto Exchanges
The Bombay High Court has upheld an arbitral tribunal’s order holding Zanmai Labs Private Limited—operator of the Wazirx crypto platform—responsible for safeguarding client assets frozen after a major 2024 cyberattack.
In a ruling delivered on Oct. 7, Justice Somasekhar Sundaresan dismissed appeals filed by Zanmai under Section 37 of the Arbitration and Conciliation Act, confirming interim measures that required the company to secure approximately ₹45 crore (over $5 million) owed to brokers Bitcipher Labs LLP, which trades under the Coinswitch brand, and Nextgendev Solutions Pvt. Ltd. According to the court order:
The petitions filed under Section 37 of the Act, and all the attendant interim applications are dismissed.
The case arose from a cyber breach on July 18, 2024, that compromised ERC-20 tokens worth about $235 million, leading Coinswitch and other brokers to challenge Zanmai’s restrictions on withdrawals from the Wazirx platform.
The Court found that Zanmai’s attempt to “socialize” losses across all users through a restructuring scheme proposed by its Singapore parent, Zettai Pte. Ltd., had no contractual basis. It ruled that Zanmai could not dilute or delegate its obligations to protect client assets, rejecting arguments that Binance, a former operational partner, was responsible for security breaches.
By affirming the arbitral tribunal’s approach, the court maintained that Wazirx and Zanmai were effectively synonymous in function and thus jointly accountable for the safekeeping of user assets. The tribunal had already applied a 45% reduction to the affected ERC-20 holdings before ordering Zanmai to post a bank guarantee covering broker claims.
The judgment marks a defining precedent in India’s digital asset regulation, establishing that crypto exchanges bear fiduciary responsibilities equivalent to financial custodians and cannot offload losses through offshore restructuring or contractual loopholes.
