Operator of defunct Tokenize Xchange ‘heavily insolvent’ with S$267 million in liabilities
Court-appointed interim judicial managers have proposed that AmazingTech be wound up as it is “unable to pay its debts” and is “no longer viable” amid an ongoing police probe.
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SINGAPORE: AmazingTech, the company behind troubled cryptocurrency trading platform Tokenize Xchange, is “heavily insolvent” with about S$267 million (US$208 million) in liabilities, said its court-appointed interim judicial managers (IJMs).
Almost all of it – S$266.3 million, or 99 per cent – is owed to customers of the platform.
The IJMs from KordaMentha proposed that AmazingTech be wound up, given how it is “unable to pay its debts” and is “no longer viable” amid an ongoing police probe.
“The IJMs are of the opinion that … transitioning the company into liquidation is the most appropriate avenue to maximise recovery for the creditors,” a press release and related documents, including a report submitted to the court, from KordaMentha said on Thursday (Sep 11).
AmazingTech and its related entities were placed under interim judicial management on Aug 15 after the High Court granted an application filed by a group of seven creditors.
These creditors were users of Tokenize Xchange and had been unable to withdraw their investments worth a total of S$4 million since the platform ceased operations in Singapore in mid-July.
The platform said it was shutting down its business following a decision by the Monetary Authority of Singapore (MAS) not to grant it a digital payment token licence.
The Singapore Police Force’s Commercial Affairs Department (CAD) and the MAS said on Aug 1 that the company is under investigation for potential offences, and its director Hong Qi Yu has been charged in court with fraudulent trading.
“HEAVILY INSOLVENT”
The IJMs said AmazingTech is “heavily insolvent”, with likely only S$2.6 million worth of assets available for distribution to creditors.
These comprise the firm’s digital asset holdings, including holdings in bitcoin and ethereum, with realisable value when sold on other crypto exchanges, and about S$312,000 in fiat money seized by CAD from the firm’s local bank accounts.
The firm also has other assets, such as its proprietary technology underpinning the Tokenize Xchange platform and its native token called TKX.
According to the IJM report, CAD had seized around S$368.4 million worth of TKX tokens and S$1.969 million worth of non-TKX tokens, based on a CAD-provided valuation on Aug 14.
But the TKX tokens are likely to be a complete loss, with the tokens assessed to have “little inherent value”, as their marketability and price were tied to Tokenize's ability to build a functioning system to support the use of TKX tokens.
The IJMs said in their report that they had requested a statement of the company’s assets and liabilities from Hong after being appointed.
“However, to date, (Hong) has not provided this information, citing that the company’s records have been seized by CAD. Additionally, none of the company’s past and present officeholders have supplied us with such a statement,” it said.
In contrast with its available assets, the company had outstanding liabilities of S$267 million as of Aug 15, which include rental arrears of about S$409,442 for its office premises at Collyer Quay.
But the actual amount of liabilities could be higher, the IJMs noted in a circular uploaded on its website.
So far, it has received 15 proofs of debt claims from employees and trade creditors totalling about S$106,484, and records of digital asset holdings from 2,241 customers.
“NO REAL PROSPECT” OF SURVIVAL
In justifying its assessment for the company to be liquidated, the IJMs noted that the firm had “no real prospect” of survival due to several reasons.
For one, the ongoing police probe means that the firm has been “stripped of any realistic opportunity to lawfully operate or revive its core business”, even in other jurisdictions it was eyeing, such as Labuan or Abu Dhabi.
Even if it did manage to obtain regulatory approvals, its “untenable” financial position would mean insufficient assets or funds to support any restructuring, acquisition or relocation efforts, documents provided by the IJMs said.
The IJMs said they have ascertained that the company’s plans to obtain licensing in Labuan, a federal territory of Malaysia, had failed after the charging of Hong, who is the chief executive and founder of Tokenize Xchange.
On the other hand, the firm’s plans to obtain licensing in the Abu Dhabi Global Market, a financial zone located in Abu Dhabi, “never developed past a preliminary stage”.
It was previously reported that in an email sent to users on Jul 8, Tokenize said it was in the “final phase” of obtaining a licence from the Abu Dhabi Global Market.
The report also disclosed a letter dated Jul 4 from the MAS, which stated why the financial regulator rejected Tokenize Xchange’s licence application.
These reasons included how the platform’s key enhancements, such as appointing an independent director and setting up an audit and risk board committee, were only implemented in response to the authority’s feedback.
MAS said this was “consistent” with its observation that AmazingTech was reliant on external service providers and MAS for compliance matters.
In addition, AmazingTech did not sufficiently demonstrate how its governance structure has been effective, it added in the letter addressed to Hong.
The IJMs also ruled out the possibility of preserving part of the company’s business and the implementation of a scheme of arrangement for rescue financing as “there does not appear to be any source of external investment (or) funding which the company can look to”.
An application has been made to the High Court for the winding up of AmazingTech, said the IJMs, adding that they instructed their lawyers to take the “required actions to enable the winding up hearing to be heard before or concurrently with the judicial management hearing” scheduled for Sep 29.
