Crypto firm Zipmex’s investor pulls plug on US$100 million bailout

SINGAPORE-BASED crypto exchange Zipmex has sunk into deeper trouble after its Thai buyout investor scrapped a US$100 million deal to rescue the company and restore customer funds.

In an Apr 16 letter seen by The Business Times (BT), the investor, V Ventures, demanded a clawback of US$4.6 million it already invested in Zipmex. The sum was mostly used for working capital.

The about-turn deals another blow to Zipmex’s 70,000 customer-creditors, who were holding out for a full return of their crypto assets still trapped on the exchange.

Zipmex is also struggling to pay salaries to employees after its investor withheld an injection of cash, a source told BT.

V Ventures had in early April proposed an up to 90 per cent haircut on its original deal, indicated a letter from Zipmex’s lawyers to the Singapore court, obtained by BT.

The revised scheme would have resulted in customers and vendors receiving only 10 to 20 cents on the dollar of their existing debt, instead of fully recovering their money.

That proposal is now off the table after V Ventures deemed the entire deal terminated. It accused Zipmex of failing to fulfil its obligations for the funding.

Last November, V Ventures agreed to purchase digital assets that were to be transferred to Zipmex, as part of efforts to restore customers’ access to their cryptocurrencies.

V Ventures made the purchase late last year, an affidavit submitted to the court by Zipmex CEO Marcus Lim showed.

Cryptocurrency prices have risen since then. Bitcoin’s price has jumped about 66 per cent this year, to trade at above US$27,000 as at Sunday (Apr 23).

“Our client urges your clients to abide by the contractual bargain that it has struck and not attempt to renege on it just because cryptocurrency prices have recovered,” Zipmex’s lawyers wrote in a letter on Apr 19, seen by BT.

Venture capital firm V Ventures was founded by Chalermchai Mahagitsiri, son of Thai coffee king and billionaire Prayudh Mahagitsiri.

The firm is a unit of Thoresen Thai Agencies (TTA), a Thailand-listed investment holding company with businesses in shipping, offshore services and agrochemicals. The group’s subsidiary Mermaid Maritime is listed on the Singapore Exchange.

TTA had 1.5 trillion baht (S$59.1 million) of digital assets on its balance sheet as at end-December 2022, compared with 66.8 million baht a year ago. Its financial statements, however, do not provide details on the purpose of these digital assets.

V Ventures did not immediately respond to a request for comment outside business hours.

Jeopardised deal

Under a scheme of arrangement approved by Singapore’s High Court last month, Zipmex’s customers and vendors would have fully recovered their debt.

The investor in the scheme, which has yet to be named in court but is understood by BT to be V Ventures, was to provide tranches of funds for Zipmex’s operations.

But the firm withheld a fourth tranche of payment to Zipmex last month. In a Mar 29 lawyer’s letter seen by BT, it accused the company of not fulfilling certain conditions required for the funds.

Since the deal’s long stop date of Mar 31 has passed, the agreement is deemed terminated and Zipmex is to return all tranche payments within seven days, V Ventures’ letter on Apr 16 said.

But Zipmex is under a court-granted debt moratorium, which was extended last Friday by another two months to Jun 30.

V Ventures’ pullout could complicate Zipmex’s search for other investors. After it emerged as a white knight for Zipmex, V Ventures was granted super-priority claim, over all other creditors, on the assets of Zipmex Thailand and Zipmex Exchange Indonesia.

Zipmex is considering taking legal action against V Ventures for reneging on the deal, though any proceedings are likely to require the new investor’s support.

The company has said, in legal correspondences, that V Ventures hindered Zipmex’s best efforts to fulfil obligations under the investment agreement.

Zipmex could seek damages arising from its inability to raise rescue funding from other investors, and damages arising from being in breach of the court-sanctioned scheme of arrangement.

“(Zipmex) will rely on the fact that there has been other interested investors which it had rejected by choosing to enter into the SSA (share subscription agreement) with your client,” Zipmex’s lawyers Morgan Lewis Stamford said in a letter to Rajah and Tann, the law firm representing V Ventures.

Zipmex is in talks with BSQ Capital – an Asian investor focused on the digital economy and blockchain technology – and a Bangkok-listed company for funding, the court heard last Friday.