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We would like to update all users of the WazirX platform that Zettai Pte Ltd (“Zettai”) took the next step to resolve users’ cryptocurrency balances on the platform following the cyberattack and theft of crypto tokens from the Platform on July 18, 2024, and filed an application with the High Court of Singapore on August 27, 2024. (HC/OA 861/2024) A moratorium under section 64 of the Insolvency, Reorganization and Winding-up Act 2018 to facilitate an intention to reorganize its liabilities under a scheme of arrangement (the “Scheme”). Copies of the application as well as the supporting affidavit have been provided to platform users by email.
In moratorium
The moratorium provides breathing space while Zettai progresses restructuring, which represents the most efficient way to resolve users’ cryptocurrency balances on the Platform and facilitate users’ recovery. An automatic 30-day moratorium is triggered from the filing of the application (ie 27 August 2024) and the Singapore court will decide whether to grant the moratorium requested at the hearing of the application (and the duration of the moratorium, if granted). ). A date for the hearing has not yet been set and we will let you know when we receive more information from the Singapore court.
As users have pointed out, there is an ongoing dispute between Zettai and Binance. Because this dispute is subject to confidentiality obligations, please note that we may not be able to disclose certain information related to the dispute. However, while this dispute is ongoing, Zettai has taken the initiative to simultaneously facilitate resolution for Platform users as contingent unsecured creditors of Zettai as quickly and efficiently as possible.
Reorganization according to the scheme
We expect that in the event of a planned restructuring, the impact of the cyberattack will be prorated among users who rank equally as unsecured creditors, and users will receive a share of the existing token assets associated with the Platform that is proportionate to their share. all users’ unsecured claims for their account balances.
This will be accompanied by mechanisms to increase the recovery of these tokens, such as the tracking and recovery of stolen tokens, the introduction of revenue-generating products and profit-sharing mechanisms, and potential third-party partnership opportunities, all of which will benefit users.
The scheme will allow tokens to be distributed to users of the Platform in a fair, legally binding and creditor approved manner quickly and efficiently.
The scheme, if approved by creditors and approved by a Singapore court, will be legally binding on all relevant parties, including Zettai. Zettai is expected to take at least 6 months to review the terms of the restructuring plan and work with relevant stakeholders. During this period, we will endeavor to provide timely updates as well as receive feedback from its creditors and stakeholders.
If restructuring fails, settling crypto balances through alternative channels may involve undefined risks and timelines. Restructuring can offer a more flexible and customizable approach compared to other possible options.
We understand that this is probably longer than what some Platform users are expecting, however, it is also the most efficient and cost-effective process possible.
Request for moratorium support
We have filed for a moratorium to allow the team time and space to pursue this restructuring. We are all working towards the same goal of achieving an acceptable outcome for users of the Platform, given the circumstances, and we are sure you will agree that it is in your best interest to support this moratorium and restructuring.
Municipality
We and our consultants will hold a town hall via video conference during the week of September 2, 2024 to explain key features of the moratorium and the scheme and address user questions. Zettai is advised by Kroll Pte Ltd as financial advisor, Rajah & Tann Singapore LLP as legal advisor in Singapore and Nishith Desai Associates as legal advisor in India.
More details about this municipality will be provided in the coming days, and users will be given the opportunity to ask the municipality questions in advance.
FAQs
Question: What is the Singapore Scheme of Arrangement?
A Scheme of Arrangement is a corporate rescue and restructuring mechanism set out in the Singapore regulatory framework under the Insolvency, Reorganization and Winding Up Act 2018 (“IRDA”). Through the scheme, a company can make an offer to its creditors to restructure its debts and potentially provide stronger compensation to creditors than in an insolvent liquidation. The scheme is subject to majority approval The number of creditors of each class holding at least 75% of the company’s liabilities and the sanction of the Court.
A creditor-approved and court-approved scheme will be legally binding on both the Company and its creditors, and IRDA sets out clear deadlines, requirements and court processes to ensure that creditors have sufficient information to make an informed decision about the proposed terms. :
Question: What is a moratorium? Why is Zettai applying for a moratorium?
Answer: A moratorium is a form of legal remedy under Singapore law that protects the applicant from creditor enforcement, such as liquidation proceedings, enforcement of security and other legal proceedings, which are stayed until the moratorium expires.
Zettai is applying for a moratorium to ensure that Zettai has sufficient time and breathing space to work on a restructuring for the benefit of its creditors, which is the fastest and most efficient process for users to obtain recovery of enhanced tokens.
A moratorium is key to enabling restructuring and it is in the best interest of users to support Zettai’s bid for a moratorium.
Question: When will I be able to withdraw cryptocurrency?
A: Zettai is pursuing restructuring under the Singapore Scheme of Arrangement. Once the restructuring proposal and scheme are approved by creditors and approved by the High Court of Singapore, Zettai will be able to reopen cryptocurrency withdrawals in accordance with the terms of the Scheme.
The Scheme is expected to last at least 6 months and is the fastest way to allow cryptocurrency withdrawals to reopen.
Question: What is an unsecured creditor and why are users unsecured creditors?
A. An unsecured creditor, in this case, holds an unsecured claim to the value of their token balances and has no claim to any particular token.
The Platform Terms of Use define the legal basis for each user’s unsecured claim related to their account balances on the Platform. The User can make deposits and trades and have claims for account balances on the Platform. In the event that users of the Platform submit a withdrawal request in accordance with the terms of use of the Platform, Zettai is obliged to transfer such funds to the users (if it turns out that Zettai has the Platform with its funds). With this in mind, users are contingent creditors of Zettai.
In other words, there is no special agreement between the Platform and the general users of the Platform, because the Platform holds any special token that is held in trust for the general users of the Platform, and therefore no ownership claim (i.e. a claim to specifically identifiable property) arises. is. On the other hand, the Platform had accepted cryptocurrency token deposits from various Indian law enforcement agencies (“LEAs”) under a special arrangement where the Platform will hold these tokens in trust for the LEAs, and thus these LEAs have ownership claims to such token deposits.
Question:
Answer: A cyber attack on July 18, 2024 led to the theft of a large volume of ERC-20 tokens, which inconsistently affected the platform’s token assets, as non-ERC-20 tokens were not affected and remained under the control of the platform.
This has resulted in the platform’s token assets being significantly out of balance with the token balances of users displayed on the WazirX platform who are making contingent unsecured claims against Zettai.
The scheme is required to be legally binding, to facilitate justice, and a creditor-approved approach to token asset allocation.
Disclaimer: Cryptocurrency is not legal tender and is currently unregulated. Please ensure that you carry out a sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information presented in this section does not represent any investment advice or the official position of WazirX. WazirX reserves the right, at its sole discretion, to modify or amend this blog post at any time and for any reason without prior notice.
