Troubled crypto exchange Zipmex has filed for a moratorium in Singapore to extend its protection from legal action by aggrieved creditors.
The application comes barely a week after the exchange stopped withdrawals from its platform due to a liquidity shortage. Zipmex’s attorney, Morgan Lewis Stanford, has sought a court order that prevents creditors from suing the company for six months.
According to Zipmex, the moratorium will allow the team to focus all its efforts on resolving the liquidity issues affecting its operations.
The Zipmex group subsidiaries covered by the application are Zipmex Asia Pte Ltd, Zipmex Pte Ltd, Zipmex Company Limited (incorporated in Thailand), Zipmex Exchange Indonesia and Zipmex Australia Pty Ltd.
The company needs more time?
Under Singapore law, a company facing a liquidity crisis can apply for a moratorium, which automatically gives it 30 days’ protection from creditors’ legal action. This is to allow the company to explore options to settle with its creditors or to apply for an extension of the moratorium. If the company needs more time, the presiding court will hold a hearing with the relevant creditors to decide whether to extend the moratorium.
In Zipmex’s case, the hearing will take place on July 29. If the court grants its request, it will use the six-month period to explore all available options to pay its creditors out of court.
A similar case is underway for a Singapore-based crypto lender, Vauld. The platform stopped customer withdrawals on July 4 and owes its customers $363 million. As its liquidity crisis worsened, it asked the Singapore High Court for a six-month moratorium. The hearing is scheduled for August. However, the company is in advanced stages of discussion for a potential acquisition by crypto lending company, Nexo.
To create a restructuring plan and secure more investments
The financial crisis of the exchange is closely related to the collapse of Babel Finance and Celsius. It has $53 million in exposure to the two crypto companies, which defaulted on loans due to declining market conditions. Zipmex is looking to pursue collection of the $48 million loan from Babel Finance as it forgives the $5 million owed by Celsius.
Zipmex is working to create a restructuring plan and secure more investments to secure its operations. It confirmed in an announcement that it received a large amount of capital to inject into the platform when the second memorandum of understanding (MOU) was signed on July 27.
The exchange said that with the initial deposit from an interested investor, it will proceed to discuss the final terms and hopefully deploy the funds to continue its operations.