Singapore High Court grants crypto exchange Zipmex 3-month creditor protection

Zipmex recently allowed partial withdrawals after shutting them down late last month. PHOTO: BLOOMBERG

SINGAPORE (THE BUSINESS TIMES) - Cryptocurrency exchange Zipmex, crippled by its exposure to crypto companies Babel Finance and Celsius Network, has been given a three-month extension of its moratorium by the Singapore High Court.

Zipmex disclosed in July that it had US$48 million (S$66 million) of exposure to Babel and US$5 million with Celsius, becoming the latest victim of a crypto contagion sparked by the collapse of the TerraUSD stablecoin.

The company filed an application on July 22 for moratoriums shielding Zipmex Asia and key operating subsidiaries from potential creditor lawsuits. The other entities named in the application are Zipmex Pte Ltd (the Singapore entity), Zipmex Company Limited (the Thai entity), Zipmex Australia and PT Zipmex Exchange Indonesia.

Zipmex had sought a five-month extension, but Justice Aedit Abdullah on Monday (Aug 15) raised concerns about the group’s insufficient engagement with creditors, particularly customers in Thailand. He granted a three-month extension to Dec 2 for the group to sort out the matters raised, with the possibility of a further extension later.

Justice Abdullah pointed out that a town hall with creditors has not been held, and while Zipmex’s counsel noted that no Thai creditors have filed affidavits objecting to the group’s application, the judge said more must be done to engage them.

“It is not enough to say that no objections were received, because if we are dealing with lay creditors, it will be difficult for them to file affidavits in Singapore. And I also appreciate that there might be language issues... Nonetheless, they have an entitlement to object and to make it known what their concerns are,” he said.

This is a stark contrast to Defi Payments’ moratorium application hearing on Aug 1, in which Justice Abdullah noted the crypto platform’s efforts at engaging creditors.

Three investment proposals are currently on the table for Zipmex. The company has signed a memorandum of understanding with two investors, and received a non-binding letter of offer from another investor.

Each of the investors intends to inject capital into the company, either through the purchase of shares in Zipmex Asia, or the injection of crypto assets into the company in exchange for shares, said Zipmex’s lawyer, Mr Jonathan Tang from Morgan Lewis Stamford.

There are discussions about incoming funds for working capital, and two of the proposals involve US$2.5 million being injected into the company.

The three investors’ main intention is to plug “the liquidity hole” caused by Babel and allow customer withdrawals to resume, said Mr Tang. Zipmex halted withdrawals in July, but has let users partially withdraw Ether since Aug 11 and Bitcoin since Aug 16.

Zipmex’s Singapore entity has not received any objections or support through affidavits filed. There are around 60 objections primarily from Thailand-based creditors who have assets governed by Zipmex Pte Ltd due to the group’s operational structure. The objections represent an aggregate value of about US$1.1 million of debt. The impact of Zipmex’s struggles on Thai consumers has been closely watched, with Thailand’s Securities and Exchange Commission announcing on July 25 that it was working with law enforcement to look into potential losses among the public.

Mr Tang said a creditor town hall has yet to be held as the group is still in the process of engaging a restructuring adviser with the resources to engage a large body of creditors. He proposed that a town hall be held within one month.

Justice Abdullah asked for a formal update in six weeks, and directed that the Thailand-based creditors in particular be informed what the proceedings in Singapore mean to them. He added that the town hall should address the state of the investment proposals and how concrete they are, as well as when the creditors will be able to access their wallets.

Other crypto companies have also filed for bankruptcy protection in recent months as the space began to unravel. Defi Payments, an applicant for a Singapore digital payment token licence, is under a moratorium as it seeks to restructure debt of US$402 million owed to about 147,000 creditors across the globe.

Bankrupt crypto lender Voyager Digital and billionaire Mark Cuban are in trouble after a civil lawsuit was filed against them in the United States, alleging that Mr Cuban and Voyager chief executive Stephen Ehrlich, as well as the Dallas Mavericks National Basketball Association team owned by Mr Cuban, used their influence to misrepresent the brokerage and defraud investors.

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