CRYPTOCURRENCY exchange Zipmex, crippled by its exposure to crypto companies Babel Finance and Celsius Network, has been given a 3-month extension of its moratorium by the Singapore High Court.
Zipmex disclosed in July that it had US$48 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 Jul 22 for moratoria 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 Pty Ltd, and PT Zipmex Exchange Indonesia.
Zipmex had sought a 5-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 3-month extension to Dec 2 for the group to sort out the matters raised, with the possibility of a further extension later.
Justice Aedit 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, Justice Aedit said more must be done to engage them.
"It's not enough to say that no objections were received, because if we're 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 Aedit 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 (MOU) with 2 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 Jonathan Tang from Morgan Lewis Stamford.
There are discussions about incoming funds for working capital, and 2 of the proposals involve US$2.5 million being injected into the company.
The 3 investors' main intention is to plug "the liquidity hole" caused by Babel and allow customer withdrawals to resume, said Tang. Zipmex halted withdrawals in July, but has since let users partially withdraw Ether from Aug 11 and Bitcoin from Aug 16.
Negotiations regarding vendor creditors are ongoing. It is unclear how they will be repaid - whether in full, or through a scheme of arrangement where they take a haircut.
"In each of the MOUs and the non-binding offer, there is the expectation that any shareholding of Zipmex Asia that goes to the new investor will come debt-free. Which means that regardless, there has to be some compromise or some repayment to all the vendor creditors," said Tang.
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 Jul 25 it was working with law enforcement to look into potential losses among the public.
Over a Zoom hearing on Monday, Tang said that following the Singapore entity's outreach to its top 20 creditors, support for the restructuring has been garnered from creditors representing about US$6.5 million of debt. Excluding related creditors, or shareholders, the company has 3 creditors holding US$2.6 million of debt supporting the restructuring.
Zipmex's Australia entity has received 7 emails of support including from its second-largest creditor. In Indonesia, 3 out of the top 20 creditors have indicated support for the restructuring and moratorium extension.
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 1 month.
Justice Aedit asked for a formal update in 6 weeks, and directed that the Thailand-based creditors in particular should 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.
Zipmex is to consider whether a creditor's committee should be established, especially for Thailand. The group also has to report its management accounts to the courts and creditors every month.
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.
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