From crypto start-up to multijurisdictional group to liquidation
By way of background, the AXIA project was founded in Ontario in early 2018 for the purpose of creating and developing a cryptocurrency token. Its corporate structure was moved offshore in 2019, and ultimately comprised a substantial number of entities in no less than 27 jurisdictions, whilst having raised investments totalling around USD 41 million globally from approximately 9,500 token holders.
The Group began facing regulatory challenges around mid-2020, with the Ontario Securities Commission investigating its promotion and sale of the AXIA Coin. Despite its efforts to overcome regulatory concerns, including seeking a “fresh start” through the incorporation of ANF in April 2022, it was forced to suspend the trading of its AXIA Coin shortly thereafter, in October 2022, and appointed independent directors to assume control of ANF the following month – who in turn appointed Alvarez & Marsal as independent financial and restructuring advisors.
Thereafter, a strategy was developed for the wind-down of the AXIA Group, with the Cayman Islands being
the preferred jurisdiction, given its statutory merger regime and sophisticated regime for corporate liquidations. As part of the wind-down process, MergeCo was incorporated, and several AXIA Group entities merged into it, in order to facilitate their liquidation within a single jurisdiction.
In the course of 2024, both MergeCo and ANF were then placed into voluntary liquidation, and their joint voluntary liquidators (JVLs) subsequently filed petitions to bring their voluntary liquidations under the supervision of the Grand Court pursuant to s.131(b) of the Act (on the basis noted above). The JVLs also simultaneously applied for sanction, if appointed as joint official liquidators (JOLs), to seek recognition of the liquidations in the USA, pursuant to Chapter 15 of Title 11 of the United States Code, to address proceedings being pursued in the Wyoming courts against two former AXIA Group companies that had been dissolved, with their assets and liabilities having been assumed by ANF and MergeCo, respectively.
The Court’s evaluative process
As the Cayman Islands Court of Appeal held in Re Asia Private Credit Fund,[2] s.131(b) of the Companies Act provides jurisdictional thresholds which an applicant must overcome before a supervision order can be made, namely that there is the immediate potential that an official court-supervised liquidation will facilitate a more effective, economic or expeditious liquidation of the relevant entity, in the interests of its stakeholders.
In his ex tempore ruling, Justice Doyle applied that decision and held that the jurisdictional thresholds had been overcome for the following reasons, such that it was appropriate to make supervision orders in respect of each of ANF and MergeCo:
- The multijurisdictional issues relating to the status of cryptocurrency coin holders which may arise.
- The confidence in the Cayman liquidation process which the appointment of official liquidators (with duties to the Court) should provide to stakeholders.
- The likelihood that issues of some complexity will arise in the course of the liquidations (including regarding proofs of debt and distributions) which make independent judicial oversight desirable.
- The investigative powers afforded to official liquidators and the various provisions of the liquidation regime should facilitate more effective liquidations for stakeholders as a whole.
- The Supervision Orders will trigger a stay of proceedings pursuant to section 97 of the Companies Act.
- Judicial supervision may also facilitate the more economic liquidations of the companies and it should help to save costs by reducing the likelihood and possible magnitude of any dispute with the stakeholders.
- As Field JA observed in Re Asia Private Credit Fund, the investigative and other powers of an official liquidator are significantly greater than the abilities of a voluntary liquidator.
- The JOLs, with the sanction of the court, may file a Chapter 15 petition for recognition to address the Wyoming Proceedings; and any further applications for recognition and assistance which may be necessary in other relevant jurisdictions.
Having made the supervision orders, Justice Doyle then proceeded to grant the applications for sanction to file Chapter 15 petitions in the US Bankruptcy Court, seeking the recognition of the official liquidations of each of ANF and MergeCo as foreign main proceedings.
The Appleby team which made the supervision and sanction applications comprised Andrew Jackson (Partner and lead advocate), Charlotte Walker (Senior Associate) and Ross McLeod (Associate), as counsel to Christopher Kennedy and Alexander Lawson of A&M, then as JVLs (now JOLs) of ANF and MergeCo.
[2] [2020] 1 CILR 134
