Loh Cheng Lee Aaron v Hodlnaut Pte Ltd: Winding Up for Cryptocurrency Liabilities under IRDA

The General Division of the High Court of Singapore heard an application by Aaron Loh Cheng Lee and Ee Meng Yen Angela to wind up Hodlnaut Pte Ltd. The court, presided over by Aedit Abdullah J, ruled on November 10, 2023, that cryptocurrency obligations constitute debts under the Insolvency, Restructuring and Dissolution Act 2018. The court found Hodlnaut Pte Ltd to be cash flow insolvent and granted the application to wind up the company.

1. Case Overview

1.1 Court

General Division of the High Court

1.2 Outcome

Application to wind up the Company granted.

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court orders Hodlnaut Pte Ltd to be wound up, holding that cryptocurrency liabilities count as debts under the Insolvency, Restructuring and Dissolution Act.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Official ReceiverNon-partyGovernment AgencyNeutralNeutral
Ramesh Chandra of Independent Practice
Aaron Loh Cheng LeeClaimantIndividualWinding up orderedWon
Ee Meng Yen AngelaClaimantIndividualWinding up orderedWon
Hodlnaut Pte LtdDefendantCorporationWinding up orderedLost
Zhu JuntaoNon-partyIndividualNeutralNeutral
Simon Eric LeeNon-partyIndividualNeutralNeutral
Algorand Foundation LtdNon-partyCorporationNeutralNeutral
S.A.M. Fintech Pte Ltd (in liquidation)Non-partyCorporationNeutralNeutral
Samtrade Custodian Limited (in liquidation)Non-partyCorporationNeutralNeutral

3. Judges

Judge NameTitleDelivered Judgment
Aedit AbdullahJudge of the High CourtYes

4. Counsels

Counsel NameOrganization
Ramesh ChandraIndependent Practice
Leo Zhen Wei LionelWongPartnership LLP
Li Yiling EdenWongPartnership LLP
T AbiramiWongPartnership LLP
Manoj Pillay SandrasegaraWongPartnership LLP
Toh Yong XiangWongPartnership LLP
Md Noor E AdnaanWongPartnership LLP
Stephanie Yeo Xiu WenWongPartnership LLP
Andrew PflugWongPartnership LLP
Chng Qi Yun ClariceWongPartnership LLP
Suresh s/o DamodaraDamodara Ong LLC
Ong Ziying ClementDamodara Ong LLC
Ning JieDamodara Ong LLC
Leonard Chua Jun YiDamodara Ong LLC
S M Sukhmit SinghDamodara Ong LLC
Darius Malachi Lim Wen HongDamodara Ong LLC
Lim Dao Yuan KeithDamodara Ong LLC
Kang Kok Boon, FavianAdelphi Law Chambers LLC
Quah Wei Sheng DannyCHP Law LLC
Ong Hui JingCHP Law LLC
Wee MinWongPartnership LLP
Chan DanielWongPartnership LLP
Ho Zi WeiRajah & Tann Singapore LLP
Ang Peng Koon PatrickRajah & Tann Singapore LLP
Raelene PereiraRajah & Tann Singapore LLP
Wong Ye YangRajah & Tann Singapore LLP

4. Facts

  1. Hodlnaut Pte Ltd was placed in interim judicial management.
  2. The court directed the interim judicial managers to present a winding up petition.
  3. One of the directors filed an application for a 3-month moratorium based on the OPNX Offer.
  4. The directors argued that cryptocurrency holdings should not be counted as debts.
  5. The interim judicial managers argued that the company is unable to pay its debts.
  6. The company imposed withdrawal halts on cryptocurrency for creditors.

5. Formal Citations

  1. Loh Cheng Lee Aaron and another v Hodlnaut Pte Ltd, Companies Winding Up No 94 of 2023, [2023] SGHC 323

6. Timeline

DateEvent
Interim judicial management order dated
Court directed interim judicial managers to present a winding up petition
Hearing regarding directors' conduct and OPNX Offer
Winding up application proceeded
Judgment reserved

7. Legal Issues

  1. Whether cryptocurrency funds held by the company from various creditors should count as “debts” within the meaning of s 125(1)(e) read with s 125(2)(c) of the Insolvency, Restructuring and Dissolution Act 2018
    • Outcome: The court held that the company's obligation to pay cryptocurrency to its creditors counts as debts owed by the company and are relevant in determining whether the company is insolvent.
    • Category: Substantive
    • Sub-Issues:
      • Definition of 'debt' under IRDA
      • Treatment of cryptocurrency as an asset
  2. Whether the company is indeed cash flow insolvent
    • Outcome: The court was satisfied that the company is indeed cash flow insolvent, taking into account the cryptocurrency obligations owed.
    • Category: Substantive
    • Sub-Issues:
      • Assessment of current assets and liabilities
      • Valuation of cryptocurrency holdings
  3. Whether the court’s discretion should be exercised against winding up to give further time to rehabilitate the business
    • Outcome: The court was not satisfied that the grounds exist for winding up not to be ordered, finding the likelihood of success in the proposed restructuring very low.
    • Category: Procedural
    • Sub-Issues:
      • Likelihood of successful restructuring
      • Creditor support for restructuring

8. Remedies Sought

  1. Winding up order

9. Cause of Actions

  • Winding up

10. Practice Areas

  • Commercial Litigation
  • Insolvency
  • Cryptocurrency

11. Industries

  • Financial Services
  • Cryptocurrency Exchange

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd)Court of AppealYes[2021] 2 SLR 478SingaporeCited for the test of cash flow insolvency, clarifying that the court considers whether a company’s current assets exceed its current liabilities.
Algorand Foundation Ltd v Three Arrows Capital Pte LtdGeneral Division of the High CourtYesHC/CWU 246/2022SingaporeDistinguished from the present case as it involved a winding-up application based on indebtedness under s 125(2)(a) of the IRDA, where the demand was in cryptocurrency, which did not meet the requirements of a demand for a money sum.

13. Applicable Rules

Rule Name
O 22 r 1 of the Rules of Court 2021

14. Applicable Statutes

Statute NameJurisdiction
Insolvency, Restructuring and Dissolution Act 2018Singapore
Section 125(1)(e) of the Insolvency, Restructuring and Dissolution Act 2018Singapore
Section 125(2)(c) of the Insolvency, Restructuring and Dissolution Act 2018Singapore
Section 125(2)(a) of the IRDASingapore
Section 125(1) Insolvency, Restructuring and Dissolution Act 2018Singapore
Companies Act 1967Singapore
Section 210(1) of the Companies Act 1967Singapore
Payment Services Act 2019Singapore
Section 2 of the Payment Services Act 2019Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Cryptocurrency
  • Winding up
  • Insolvency
  • Debts
  • Cash flow insolvency
  • Interim judicial management
  • Withdrawal halt
  • IRDA
  • Liquidators

15.2 Keywords

  • Winding up
  • Cryptocurrency
  • Insolvency
  • Hodlnaut
  • Singapore
  • IRDA
  • Debts
  • Cash flow insolvency

17. Areas of Law

Area NameRelevance Score
Winding Up95
Insolvency Law90
Restructuring and Dissolution80
Bankruptcy75
Cryptocurrency Law70
Judicial Management65
Company Law60
Banking and Finance30

16. Subjects

  • Insolvency
  • Cryptocurrency
  • Company Law