BABEL HOLDING LIMITED

Facts

Five companies trading under the Babel Finance brand, which carries on cryptocurrency lending and asset management, applied together under s 64 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). They were the Cayman Islands holding company, a BVI subsidiary, two Singapore subsidiaries, and Moonalpha, a separate Hong Kong company now said to operate under the brand. They sought a six-month extension of moratoria to give them time to prepare a single scheme of arrangement for the whole group. The proposed scheme would pool the assets and liabilities of all the companies, use a deed poll so that one Singapore subsidiary became a primary co-obligor for the group's scheme claims, convert customers' deficits into recovery tokens, and bring in new investment. The companies also asked for documents listing their creditors and letters of support to be sealed.

A creditor, DRB Panama Inc (Deribit), opposed both applications. It argued that the applicants lacked good faith because they had redacted creditor identities and not disclosed alleged breaches of licensing requirements under the Payment Services Act 2019 and the Securities and Futures Act 2001; that the foreign companies had no substantial connection to Singapore; that pooling had no legitimate purpose; and that the scheme was unworkable.

Issues

1. Whether the documents identifying creditors should be sealed.
2. Whether the foreign applicants had a substantial connection with Singapore so as to be liable to be wound up under the IRDA.
3. Whether the applications were made in good faith with a reasonable prospect of the scheme working and being acceptable to creditors.
4. Whether pooling and a deed poll structure are proper mechanisms in a scheme of arrangement.

Holding

Aedit Abdullah J allowed the sealing applications and granted the moratoria extensions in part, for about three months rather than the six months sought, so that the court could keep the matter under supervision. Further extensions could be considered if the scheme progressed well.

Reasoning

On sealing, the court balanced the competing interests. At the moratorium stage, before any application for a scheme meeting or sanction, the need for creditors to consult one another was less pressing than protecting commercially sensitive information about who was exposed to the group.

The foreign applicants each had clients and creditors in Singapore, and at least some of their work was done by a team working from Singapore, which showed activities of some permanence and a substantial connection. The court declined to decide where cryptocurrency is situated for legal purposes.

At this stage the court takes only a broad view of the scheme's prospects and does not require a poll of creditors. A combination of pooling, conversion and fresh investment was not so unworkable that it should be kept from a creditors' vote. On good faith, the court said it should not let its processes be used where a statutory breach is clear, but the alleged licensing breaches were not clearly established, as the applicants said they served only accredited and institutional investors and there was no evidence of regulatory action.

Only a preliminary view could be given on the mechanisms. The words "compromise" and "arrangement" in s 210 of the Companies Act are broad enough to cover pooling and a deed poll, Australian authority supported pooling within a scheme, and a deed poll had been accepted in an earlier Singapore case. Commingled funds might justify such tools where separating each company's assets would be impractical.

From the judgment