Singapore Court Denies Restructuring Plan of WazirX Parent Company Zettai

Key Highlights

• Singapore High Court rejects Zettai's restructuring plan after $235 million WazirX cyber heist.
• Court cites Zettai's undisclosed Panama subsidiary, Zensui, as reason for rejecting restructuring proposal. 

In a major setback for cryptocurrency traders on exchange platform WazirX, the Singapore High Court (HC) rejected the parent company's proposed restructuring plan nearly a year after an alleged cyber heist resulted in a loss of $235 million in virtual digital assets.

The dismissal of parent company Zettai's scheme of arrangement comes just weeks after the company established a subsidiary, Zensui Corporation, in Panama. According to people familiar with the case, the court action was prompted by the company's failure to disclose these incorporation details during the restructuring process.

Zensui was incorporated on March 10 of this year, according to an affidavit filed with the Singapore court and reviewed by Business Standard.

Furthermore, the company stated that Zettai did not intend to obtain a digital token service provider (DTSP) license in Singapore. It also stated that neither the parent nor its Panama subsidiary intended to apply for registration with the Financial Intelligence Unit-India (FIU-IND).

"The Singapore High Court issued an order declining to approve our proposed restructuring plan. While this outcome did not meet our expectations, we respect the court's decision and remain fully committed to following all legal and regulatory processes," WazirX stated in a post on X.

According to a person familiar with the matter, the cryptocurrency exchange may file an appeal against the Singapore court's most recent order.

The setback for the company may extend the timeline for distributing available assets to creditors.

"Zettai also failed to disclose the incorporation of its subsidiary, Zensui, which was incorporated on March 10, and an agreement to transfer cryptocurrency assets to Zensui — both of which were not communicated to users or the court," said Navodaya Singh Rajpurohit, legal partner at Coinque Consulting and founder of Pravadati Legal.

He also stated that Zettai does not intend to register with FIU-IND, which is a requirement for lawfully distributing cryptocurrency in India.

"These omissions and regulatory non-compliances made the scheme unviable and lacking in transparency," according to him.

The company stated in the affidavit that the Financial Services and Markets Act 2022 did not present any legal or practical impediment to Zettai carrying out the first distribution or allowing withdrawals in accordance with the scheme of arrangement, which is one of the reasons it did not intend to apply for the DTSP licence.

"Since the holding was in Singapore, the Panama subsidiary was in charge of the cryptocurrency related to redistribution. It was an interim measure because the firm wanted to relocate to a jurisdiction where it could adhere to a framework and regulations after June 30, according to a person familiar with the situation.

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Zettai announced in April that 93.1 percent of eligible voting creditors, representing 94.6 percent of the total value of claims, voted in favor of the scheme, months after the company proposed restructuring in the Singapore High Court.

A total of 141,476 scheme creditors voted, accounting for $195.65 million in approved claims. Of the total creditor base, 131,659 investors voted in favor of the scheme, totaling $184.99 million.