Author: Joanna Wright; Source: dlnews; Translated by: Ke Dong, Golden Finance
In a ruling that appears to end Freeway’s efforts to remain viable, a Cayman Islands Grand Court judge this week ordered the liquidation of AuBit, the parent company of the troubled cryptocurrency lending company.
In a complaint filed by AuBit, Judge David Doyle ruled that “the affairs of the company and its management urgently require a thorough and independent investigation.”
He rejected AuBit’s request to restructure Freeway rather than liquidate it.
At its peak in 2022, Freeway had $160 million in assets. Now it’s part of a field littered with the wreckage of Celsius and other failed ventures — the latest cautionary tale in cryptocurrency lending.
Freeway, formerly known as Aubit Prime, is a centralized cryptocurrency lending platform that lured users with the promise of high returns.
Under its rewards program called "Superchargers," customers can expect annual returns of up to 43%. It is one of many platforms that adopt a similar business model.
However, in October 2022, Freeway stopped withdrawals, citing trading losses.
Unable to withdraw cash
About 5,000 retail investors who deposited more than $160 million into the "Supercharger" program have been unable to withdraw their funds.
A Supercharger customer called LedgerScore sued AuBit and several related companies as defendants in August 2023 in Wyoming.
In the lawsuit, the plaintiffs claim that AuBit is a “scam” registered in a crypto-friendly U.S. state and comprised of multiple cover companies located in the Cayman Islands and the Seychelles, both known tax havens.
Additionally, the lawsuit claims that AuBit sent client funds to Greek brokerage Ardu Prime and assured clients that the funds would be held in segregated accounts.
As problems continued to accumulate, AuBit accused Ardu of refusing to cooperate with its auditors and not releasing more than $60 million in funds.
Ardu itself has been embroiled in legal troubles, with Greek authorities suspending its trading license last week, according to local media reports.
In late August, unrelated to the Wyoming lawsuit, AuBit went to a Cayman Islands court to argue that it could not repay its debts. AuBit asked for permission to bring in asset recovery firm Grant Thornton to restructure the company.
If Freeway is allowed to restructure, Grant Thornton can begin recovering its assets, Freeway said in a Medium post published on August 25, 2023. In the meantime, AuBit/Freeway plans to raise funds and fund new business lines, such as an asset tokenization platform and stablecoins.
Independent liquidator
“We believe that asset recovery, restructuring, and revenue from new products can each fund recovery,” Freeway wrote.
But in September, LedgerScore asked the Cayman Islands court to liquidate Freeway through an independent liquidator rather than allow AuBit to reorganize. The judge agreed to the request.
"The company failed to maintain any properly reliable accounts (audited or otherwise) that accurately reflected its financial condition. A genuine lack of proper accounting records emerged," Doyle wrote in his decision Thursday.
Liquidation will now allow independent experts to thoroughly examine Freeway's assets to understand where creditors' funds went, sources still associated with the business said.
Meanwhile, AuBit is trying to distance itself from the Freeway brand. Matt Oxborrow, business development officer at Freeway, tweeted in March that AuBit is different from AuBit Prime, which is based in South Africa.
However, LedgerScore rejected that claim in its Wyoming lawsuit and argued that the two companies are functionally identical.Now, the fight to find the lost $160 million will enter a new phase.