Auros & Interpath: A 99 Day Success Story
Successful restructuring and exit of Provisional Liquidation for Auros Tech Limited and Auros Global Limited
Following an urgent application to the BVI Court on 23 November 2022, Charlotte Caulfield and James Drury from Interpath Advisory were appointed as “light touch” joint provisional liquidators of Auros Tech Limited and Auros Global Limited (together, “Auros”).
Auros is an algorithmic trading and market-making firm which delivers liquidity for cryptocurrency exchanges and token projects. In addition, Auros trades in, and invests in, various crypto assets on its own account.
In common with many cryptocurrency institutions around the world, Auros had a proportion of its assets held within the FTX crypto exchange. Following the Chapter 11 bankruptcy filing of FTX in the United States on 11 November 2022, Auros’ management immediately addressed the consequences to Auros’ liquidity and sought appropriate professional advice cumulating in an application to the BVI Court for the appointment of Joint Provisional Liquidators (“JPLs”).
Pioneered as a concept by the Interpath team as JPLs in the Richcourt and Constellation cases (and in a similar vein to approaches adopted in the Cayman Islands and Bermuda), a “light touch” provisional liquidation is a “debtor in possession” type of restructuring mechanism where the incumbent management is permitted to continue to trade the business in the capacity as “Authorised Managers” under the supervision of the JPLs, whilst a restructuring plan is formulated. This is a process the Interpath team have also followed in other such appointments including a distressed real estate property investment business.
In this instance, the JPLs received the restructuring proposal from the management based on anticipated performance and financing and consequently formed the view that restructuring was in the best interest of Auros’ creditors, having prepared a comparative analysis as to the outcomes to creditors if a restructuring was completed against an outcome for creditors if Auros was placed into full liquidation. Under this analysis, significantly less value was likely to be received by creditors over a longer period of time under a full liquidation, than if the restructuring contemplated was achieved.
At a high level, the restructuring was effected by way of separate contractual arrangements with the respective creditors in order to vary the original terms of the debts. Through consultation with creditors and the Authorised Managers, it was not considered desirable or indeed practical to utilise BVI statutory restructuring mechanisms (i.e. a scheme or plan of arrangement), on the basis that all of the creditors, with due or open repayment terms, had accepted the terms of the proposed restructuring presented to them in a collaborative effort to find a solution. As a consequence, this approach enabled the restructuring to be implemented faster and more cost effectively – speed is of the essence during a crisis and it is no different when it comes to the crypto space where the market can change suddenly and significantly.
Through significant hard work by the Authorised Managers, a substantial capital raise was achieved and together with a consensual debt restructuring between creditors, all creditors have now either termed their debts and/or have been paid in line with a debt restructuring agreement – some creditors receiving over 70% payment in crypto denominated assets.
Following an application to the BVI Court on 1 March 2023, Orders were made that the JPLs be granted their release unconditionally in relation to the provisional liquidation of the Company in accordance with section 235 of the Act and that the Auros return back to the control of the directors.
Whilst headlines involving the bankruptcy of crypto companies have recently dominated the news, it is oftentimes lost in the narrative that there are companies, such as Auros, which show how proper governance, and swift and decisive action to utilise traditional insolvency methods in a creative approach can help weather extreme conditions. Against much of the typical narrative on the crypto space, there is major potential for blockchain technology and the long-term viability of digital assets.
