Auros & Interpath: A 99 Day Success Story
Dealing with media threats – the dreaded “L” word
To the stakeholders of a company, there are few words more dreaded than liquidation or bankruptcy. The adverse connotations of these words, particularly when used speculatively in the press or on social media – present several risks to companies. If not properly managed, seemingly trivial media posts can go from being speculative to irreversibly damaging.
In addition to traditional media, companies in the crypto industry also have to deal with ‘crypto Twitter’ which is known to (un)conveniently report and comment in real time on transactions that are on chain.
With an average of over 500 million tweets sent per day and 460 million active users a month, Twitter provides the crypto community a unique environment where ideas can be exchanged: projects can be announced, milestones published, creators can share their personal thoughts and also issue reassurances when things go wrong. Combine this with the closely knitted crypto industry and you get ‘crypto Twitter’, a constantly evolving repository of questions, answers, explanations and speculations from every corner of the crypto world.
When Auros sought to enter into a “light touch” provisional liquidation to restructure its debts, it faced a particularly daunting challenge of stopping the spread of misinformation and surface assumptions during a time when the media was hungry for crypto scandals. This was made even more difficult due to the general public’s misconceptions about provisional liquidations - the purpose of which is to restructure the company - and equating the process with a liquidation or bankruptcy proceeding.
Some of Auros’ lending agreements were governed by on-chain smart contracts. This means the default of any of these contracts would be immediately visible to the public and be promptly reported on Twitter. Should there be no explanations accompanying these defaults, it would not take long for ‘crypto Twitter’ to form its own narrative and for a news outlet to run a seemingly groundbreaking story.
The circulation of speculative articles and crypto Twitter in general presented a real danger to Auros in its journey of a successful restructuring. For example, a key part to its restructuring was the receipt of new investment into the company and any adverse article could weaken Auros’ negotiating powers with potential investors or cause investors to lose faith in the project all together. With payments and defaults being on chain and consistently reported, negotiations with creditors were under more scrutiny than usual and in contrast to the fully decentralized liquidity pools, adverse media could also diminish Auros’ perceived credit rating to centralized liquidity pools and harm their future borrowing terms.
To combat the relentless media posts happening in real-time, the Joint Provisional Liquidators (JPLs) deployed a strategy of determining what was baseless and harmless Twitter chatter from information that could be damaging and misconceived, and then focussed their efforts on addressing the latter.
To address the speculation surrounding the publicized defaulted payments, the JPLs worked closely with the respective creditors to issue synchronised statements updating ‘crypto Twitter’ on the status of the apparent defaulted loans and smart contracts. By coordinating and consulting with the stakeholders of Auros, the JPLs released press statements addressing all concerns raised by the crypto community, providing clarity to the public. In doing so the JPLs provided confidence to investors and creditors to achieve the successful restructuring of Auros. This is another example of how a collaborative approach was pivotal in reaching a mutually beneficial outcome.
Since the restructuring of Auros, we have seen Twitter speculation fuel a bank run. It has never been more important for restructuring professionals to understand the real risks that social media can pose to the restructuring of a company to prevent rumors becoming the reality.
