Zipmex gets three more months of creditor protection

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 last month 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 yesterday 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 event 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 now on the table for Zipmex. The company has signed a memorandum of understanding with two investors, and has 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 of 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 last month, but has let users partially withdraw Ether since Aug 11 and will let them withdraw Bitcoin from today.

Zipmex's Singapore entity has not received any objections or support through affidavits filed. There are about 60 objections, primarily from Thailand-based creditors who have assets governed by Zipmex Pte Ltd owing to the group's operational structure.

The objections represent an aggregate value of about US$1.1 million of debt.

Mr Tang said a creditor town hall event has yet to be held as the group is still engaging a restructuring adviser. He proposed having a town hall event within one month.

Justice Abdullah asked for a formal update in six weeks, and directed that the Thailand-based creditors be informed what the proceedings in Singapore mean to them.

THE BUSINESS TIMES