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Cryptocurrency group granted extended creditor protection in Singapore

1 June 2023

The cryptocurrency market in 2022 experienced significant volatility, leading to liquidity challenges for numerous cryptocurrency exchanges and brokers.  Babel Finance, a prominent player in the industry, was among the affected companies. 

In Re Babel Holding Ltd and other matters [2023] SGHC 98, the Singapore High Court granted the applications for moratoria extensions by the companies affiliated with the “Babel Finance” brand (“BFG”) to formulate a restructuring plan via a scheme of arrangement.  The Singapore High Court also granted BFG’s application to anonymise its creditors’ names. 

Summary

BFG sought an extension of moratoria to formulate a restructuring plan via a scheme of arrangement.  The proposed scheme involved substantive consolidation or pooling of assets and liabilities of the entire BFG group.  BFG also proposed a deed poll structure under which one of the Singapore subsidiaries will become a primary co-obligor in respect of the scheme claims of the entire Babel Finance Group.

The Singapore High Court granted BFG’s application for moratoria extension as: (1) the statutory requirements under the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”); and (2) the requirements in Re IM Skaugen SE and other matters [2018] SGHC 259 (“Re IM Skaugen”) were met.

For foreign companies seeking to implement a scheme of arrangement, the IRDA only applies to companies that have a substantial connection with Singapore.  The Singapore High Court held that the foreign applicants in the BFG group have a substantial connection with Singapore as they carried on business in Singapore, has clients and creditors in Singapore, and at least some of their work appears to be conducted by a single team working out of Singapore.

The requirements in Re IM Skaugen were met as the applications are made bona fide and there is a reasonable prospect of the scheme working and being acceptable to the general run of creditors. 

The Singapore High Court allowed the sealing the documents to safeguard commercially sensitive information about the applicants’ creditors and avoid potential negative market reaction to their exposure to BFG.  At this juncture, the importance of safeguarding commercially sensitive information outweighed the interest that would be served by releasing this information to the public. 

Significance

This case provides insight into the Singapore court’s application of the restructuring and insolvency framework to cryptocurrency-related businesses.  It also demonstrates the court’s application of balancing the competing interests in play when determining whether to grant confidentiality orders. 

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